Is succession the only hurdle your family business faces?
While it’s a critical issue, advisors know there’s more to the story. This article explores three underlying challenges that can make or break your family-owned enterprise:
Interpersonal Relationships
Family bonds are a double-edged sword. Strong connections fuel success, but disagreements can be destructive. Owners and managers of family businesses are far more tightly connected than those of other businesses. Family relationships are typically the first, longest-lasting, strongest and most complex of personal relationships. They can be an exceptionally powerful force for good or ill in the context of family business ownership and management. That is why ensuring healthy and productive interpersonal relationships among owners and managers is a vital challenge in family business.
Balancing Business & Family Goals
Business performance is just as important to a family enterprise as to other commercial organizations, but it can sometimes be lost among other concerns that are unique to family businesses. For instance, a fundamental value such as profitability may, in a family business, be seen as secondary to another goal, such as providing employment to family members. While family employment can be a valid objective, unless critical business performance goals are met, the family business is not likely to survive. Maximizing business performance while also meeting other family goals is often very challenging for family businesses.
Effective Governance
Founders’ leadership styles and informality can lead to governance problems. This is in large part due to the conflicting and competing effects of the first two challenges, interpersonal relationships and business performance. Simply put, it is difficult for family business leaders to achieve the enterprise’s goals without appropriate governance. Coupled with the fact that family businesses are likely to be led primarily if not exclusively by a dynamic and decisive founder, the likelihood of governance errors becomes sizable.
Free Checklist: Is a Family Business Consultant Right for You?
Wondering if you need professional help? Visit our checklist to see if your family business can benefit from expert guidance.
