Getting Along in Family Business

The Relationship Intelligence Handbook

Edwin A. Hoover, Colette Lombard Hoover

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136782954
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This is a guide for business owning families and their professional advisors. The authors argue that the single most important factor to the success of any business is relationship intelligence. The book aims to demonstrate how improved relationships translate into more effective leadership, ownership and ethics in business.

1	The Business of Relationships

INTRODUCTION

Above all else, family business is the business of relationships. Ask a family employee, a professional advisor to family businesses, even a casual reader of the Wall Street Journal, and there will be consensus that the biggest factor in the success or failure of a family business is the relationships between family members. The intensity that this reality creates is demonstrated by the following story:

Two attorneys who had been working for some time to resolve a very difficult family business problem and had run out of ideas, sat down to discuss what to do next. One of them said, “As I see it there are really only two alternative solutions; one is logical and rational, and the other would be a miracle. The logical, rational solution is that an angel will suddenly appear from heaven, float down and sprinkle angel dust over this family and make the problems all go away… . The miracle would be that these people could just sit down for more than five minutes and talk to each other like civil human beings!!”

Yes, relationships are at the heart of family business. When things go well it’s an awesome opportunity, but when there are problems it is just simply awful. There is little middle ground in family business, and everything is at stake: personal well-being, family life, financial security, and even standing in the community. While family business successors or new founders are more prepared today with the business and management knowledge they need to deal with a competitive global marketplace, the need for relationship knowledge and skill is often ignored. Most people simply “wing it” when it comes to managing relationships. They rely on what they learned from family and others when growing up. Every time we see a parent slap a child and tell him to quit hitting his brother, we see one more negative lesson in relationship skill training.

The greatest threat to the long-term survival and success of any family business has less to do with what’s going on outside with customers, competitors and technology, than it does with what’s going on inside with relationships among the key players, especially among family members. Is the very idea of “family business” an oxymoron? Some people would argue that it is. Comparing it to other terms like “government service” and “giant shrimp,” they say that the two words “family” and “business” are contradictory and mutually exclusive. They argue that business relationships and family relationships are each complicated enough by themselves, and impossible when put together. Thus, the commonly heard admonition, “Don’t ever go into business with relatives!” While we do not agree with these sentiments, we can certainly understand how others have drawn this conclusion. Life and relationships for those within a business-owning family are indeed more complex and challenging. The business is like another family member that has immense and often unrecognized impact on the family’s expectations, prejudices, patterns of interactions, values, lifestyle, and worldview.

The interdependence of family and business is what makes a family business different. A big city is different from a rural hamlet, piloting an airplane is different from piloting a ship, and parenting a teenager is different from parenting a toddler. A family in business is different from one that isn’t. A business owned by a family is different from one that is publicly owned. We’re not talking about better or worse, good or bad, just different. That difference lies in the fact that every family business joins two very different kinds of organizations: a family and a business. This is a combination that creates something bigger than either the family or business alone can account for. The joining of a family and business produces a new reality, the family business, a combination that incorporates each. Together in the family business, both the family and business travel a journey that either one alone would never experience.

DEFINING THE DIFFERENCE: WHAT IS A FAMILY BUSINESS?

What really defines a business as a family business? This seems like a simple enough question, but the answer is not obvious to everyone, as the following brief scenario demonstrates. Many years ago we received a call from a young man who sounded desperate. He began the conversation by saying he worked in a family business and felt he and his father needed help in succession planning. He went on to say that he had been passing our newsletters on to his father with no response and wondered if we would initiate a call to his father in the hope that a meeting could be set up. While not our usual practice, we agreed to make the call to his father, but only to inquire if he had been receiving our newsletter and had found it useful. Later that day one of us made the call and found the father in his office. “Mr. Jones, I believe you have been receiving our newsletters, and I am calling to see if you find the information useful.” We knew that Mr. Jones’s reply was not what his son would want to hear. “Yes, I have seen it. Somebody, I’m not sure who, has been putting them on my desk … but you know we’re not a family business.” There was only one question left to ask: “Don’t you have other family members in the company?” To which Mr. Jones said, “I do. My son works here, but he just works here. If it got out that I thought we were a family business, my employees would all leave!”

Experiences like this have sometimes led us to say that a family business is like beauty, it’s all in the eye of the beholder. Over the years we have also said that a family business is a business that is owned and managed by members of one or more families. The first definition is too vague and the second does not adequately deal with the second- or third-generation family businesses now owned by one family member. Some second- and third-generation businesses consider themselves “family businesses” because of the family’s continuing pride and emotional attachment even when only one family member is involved. These businesses may still anticipate other family members’ involvement in future years.

A good definition of anything should reflect the characteristics that make it different from everything else. With this in mind, that which differentiates family businesses from all others is the unavoidable blending of the dynamics of both the business and the family. Therefore, the definition we have settled on is one that fully takes into account the reality that successful family business is synonymous with successful relationships:

A family business is any business in which business and family relationships have a significant impact on each other.

It is the interdependency of family and business dynamics that offers the litmus test of whether a business is a “family business.” Our definition points to the key dynamic present in every family business: family members are economically dependent upon one another, and the business is linked strategically to the quality of family relationships. It also incorporates a range of situations from multigenerational family firms with hundreds of family owners to single generation husband and wife, sibling, and cousin family businesses with only a handful of owners.

For some of you, family business is a fact of life, meaning you have a business enterprise in'which multiple family members are directly involved. You didn’t start out with a plan to create a family business, it just happened. For others, family business is a fact of choice, meaning you are the owner/manager of a company and dream of the day when children or other family members will join you. Whether you are a family business as a fact of life, or a fact of choice, Getting Along in Family Business: The Relationship Intelligence Handbook is your guide to making it work.

FALSE ASSUMPTIONS

Because family businesses present a set of unique complexities, a number of false assumptions can easily get imbedded in how a business-owning family view themselves and interpret the challenges they face. These false assumptions are detrimental to business-owning families who need to be encouraged to work with the complexities, instead of denying their significance.

False Assumption #1

All we need to do is learn how to communicate better.

In a conversation with the daughter of a family agricultural business she said, “My parents don’t see any need for outside help. They think we should just sit down and talk to one another. We did that last December—there were hugs and ‘I’m sorry,’ but the problem is still there. We’re stepping on each other’s toes and everyone runs this business like it’s their own.” Learning how to communicate has become a catch-all phrase that purports to solve all relationship ills in family business. It usually follows on the heels of people complaining about not knowing what’s going on, or people avoiding each other, or people withholding information to protect power and control. We see communication breakdowns most frequently as a symptom of something else that has gone awry in the relationship.

Don’t get us wrong, we are firm believers in the importance of learning how to communicate. Being a skilled communicator doesn’t just happen. Communication is a fundamental tool in all good relationships. However, the rush to diagnose relationship breakdowns simply as a lack of communication can lead to solutions that are temporary at best and can lead to further demoralization when they don’t work.

False Assumption #2

The biggest problem around here is the clash of egos!

How often have we heard, “Dad will never retire. This business is a big ego trip for him,” or “My children don’t want to work for success, but are always clambering to take individual credit for the good that’s accomplished.” All healthy and productive people have strong egos, they like themselves, value their abilities, and take pride in their accomplishments. That’s the way it should be. The job of every parent is to develop children with healthy egos, right? Why then are personal egos such a problem in family business? Wouldn’t it seem that a collection of strong egos would foster a strong company? What the term “clash of egos” usually refers to is an unnecessary and destructive competitive relationship characterized by the belief that when one person wins, another will lose. The assumption is that there is not enough recognition or opportunity for everyone to share in. The truth is that clash of egos is hardly ever the real problem. The real problem is that trust, respect, and optimism in the relationship have broken down. Competition and win-lose battles are misguided attempts to resolve a problem by individual force when the only lasting solution requires everybody’s participation.

False Assumption #3

The answer/solution is simple. We just need to really care about each other.

While caring about each other is an essential ingredient to getting along, it does not displace the inevitable tension and friction that develop when family members work together. Family members have been known to say to each other, “I care about you, I just don’t like you very much!” All too often, families in business place an impossible burden on family love, loyalty, and caring. They believe it is like a huge reservoir of good will that will always be there to draw on. Positive and caring family relationships are a necessary but not sufficient cause for family business success. Caring creates the motivation to deal with the complexities of running a business, but it doesn’t provide the solutions. Likewise, family relationships must be maintained, but are far too often taken for granted and left unattended until they fracture under the pressure of dealing with business problems.

False Assumption #4

Who’s to blame?

The reason “Who’s to blame?” is a false assumption is that it is never possible to find the first cause in any relationship event. Cause and effect are mutually reinforcing when it comes to relationships. Your brother yelled at you in the office because you decided not to deliver the report you promised. You made that decision because your brother told you that if you didn’t sign the buy-sell agreement your minority ownership would be worthless in the future. Your brother precipitated the showdown over the buy-sell agreement because you announced at the board meeting that you were giving all your shares to your son who is a street musician in San Francisco … and so on. Where did the problem start, what caused this ongoing series of confrontations, who is to blame? No one will ever know because the truth is that in relationships every effect becomes another cause producing another effect. It is a circular, not a linear process as we learned in school. The assumption that someone is to blame, is the originator of a problem, will always result in either a false accusation or a biased solution. Solving relationship problems means beginning with the understanding that everyone involved is both a recipient and a perpetrator. If there is cause to blame—it must be shared. You’ve heard the old saying, “If you’re not part of the solution, then you’re part of the problem.”

False Assumption #5

Everything’s going fine, we never have conflict.

Lack of conflict is not a sign that everything is well; it is just as often an indication that people have gotten numb to its effects. It’s similar to dropping a frog in a pan of hot water. Everyone knows that the poor frog will jump frantically doing everything possible to escape. But what happens if you put the same frog in a pan of water at room temperature and then gradually turn up the heat? That same frog, being the cold blooded creature it is, will gradually adjust to the increasing temperature and make no effort to escape. That frog will literally cook to death in the water making no attempt to escape. Substitute conflict in your family business with the water in the frog’s pan. Drop an outsider into it and the poor individual will jump and scream and do everything to escape. But put family members together and gradually turn up the intensity of conflict over time, and they will get used to it until it destroys them.

False Assumption #6

We’ll never be able to work well together, we’re just too different.

How many times have we heard this one? “That’s just the way I am, you’ll have to accept me, I can’t change.” Differences between us is not a condition that inevitably produces relationship disharmony; it is a normal element in relationships that potentially can produce every form of creativity. As one man said of his brother with whom he had been in business, “We were as different as night and day: I was always seeing the light at the end of the tunnel and he was always blowing it out!” Blaming the breakdown of family relationships on the differences between people is like blaming gray hair on getting old. If you don’t manage aging well, then gray hair is an enemy; but if you do, it is a sign of maturity and wisdom. If you don’t manage interpersonal differences well, they pull you apart; but if you do, they give you leverage and perspective you otherwise wouldn’t have.

False Assumption #7

We can’t worry about getting along, we’ve got to focus on the bottom line.

The corollary to this false assumption is another one: As long as the bottom line is O.K., we have nothing to worry about. Remember the frog in False Assumption #5? It’s back! The fallacy in this assumption is that there are no hard costs associated with the breakdown in relationships, nor definitive gains to be gotten when people are getting along. The following scenario should dispel this myth. It isn’t unusual, when conflict is intense, to find key family executives consuming an hour every day fighting, cooling off, dealing with noncooperation, avoiding each other, and commiserating with other employees about what an idiot “so and so” is. That’s conservatively five hours ...

Table of contents

• Cover
• Halftitle
• Title
• Copyright
• Dedication
• Contents
• Acknowledgments
• Foreword
• 1 The Business of Relationships
• 2 Understanding Relationship Intelligence
• 3 When Family and Business Meet: The Relationship Intelligence Challenge
• 4 Improving Relationship Intelligence: Tools and Methods
• 5 Assessing Your RQ
• 6 The Architecture of Family Business
• 7 Promoting RQ through Stewardship
• 8 Ethical Dilemmas in the Family Business
• 9 Leadership in the Family Business
• 10 RQ and Working with Family Businesses
• Index