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Business Insider: Consider the family behind the family business

July 6, 2022 -  By

I’ve always been mindful of the family behind the business. Growing up in a family-owned business, it was clear that our family was unlike my friends’ families. My family and our business were intertwined. In the families of my buddies, there were clear boundaries.

We had unique opportunities and challenges that “regular” families didn’t have. We also had a sense of purpose that the business brought to our lives with the burden of ensuring the company was profitable and sustainable for the future. Even as a young boy, I carried a sense of obligation to play whatever role our family business needed. Not so much for the business itself, but for the family behind the business — my family.

Family ties

As a business coach, I’ve become even more convinced that the family behind the business deserves as much attention as the business itself, especially during critical times like when a business contemplates a leadership change, ownership change or divestiture. For a family business, the outcome of these monumental changes has serious consequences for the future of the company and the family itself. Stories of families that didn’t survive such critical changes abound.

The family behind the business should not be overlooked. Major decisions should not be made without full consideration of their impact on the family or families. And when long-term strategic planning or discussions about the future of the business occur, the family should give careful thought to how the future of the business could affect the future of the family. This requires a family office.

A family office is an organizational structure to manage the family’s affairs. Family offices have been around for many years in very wealthy families but, in my opinion, are underutilized in general. With a family office in place, the family and the business benefit from thoughtful planning and careful execution of important matters affecting them. In other words, the family behind the business is not overlooked.

Navigating success

Some family businesses have successfully navigated generations of leadership changes. But many have not. Successful examples share some elements that are important to highlight. The first element is ongoing, long-term planning. The business leadership team engages in a consistent strategic planning process for the business. At the same time, the family leadership team engages in a consistent strategic planning process for the family. Sounds challenging, doesn’t it? It is. But that’s why successful examples are a fraction of the failures.

The second element is transparency. Hidden agendas and secrecy will likely sabotage a successful transition. The only way this process works is by bringing issues to light and being willing to have direct conversations about an issue. I realize this is easier said than done. It often requires outside facilitation.

The third element is trust. As Patrick Lencioni famously explained in his book, The Five Dysfunctions of a Team, there are two kinds of trust. The first is predictive trust, based on previous actions. Someone earns predictive trust by being trustworthy. Once broken, it is gone. The second type of trust is vulnerability-based trust based on faith, given out of an abundance of hope and love. It requires a person to let go and allow someone else to take the wheel, even if that’s a scary thing to do.

Successful family business transitions only occur when vulnerability-based trust is present. Predictive trust only works when people are perfect all the time, which, of course, is never the case. Predictive trust will always lead to failure.

These three elements — long-term planning, transparency and trust — are foundational principles found in successful family businesses. They take effort and time to develop, so the sooner a family business gets moving in this direction, the better.

My family business was missing one element — long-term planning. The business that my grandfather started in 1940 no longer exists. For 80 years, this business provided for my family, but it never made it to the third generation because there was no plan in place. Sad, but true. And powerfully motivating.

Now go forth.

Phil Harwood

About the Author:

Harwood is a Managing Partner with GrowTheBench and Pro-Motion Consulting. Reach him at Phil@GrowTheBench.com. He is a Landscape Industry Certified Manager, NALP Trailblazer, NALP Consultant, and Certified Snow Professional. Harwood holds a BA in Marketing and Executive MBA with Honors from Michigan State University.

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