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Challenges in Family Business

By Family GovernanceOctober, 2020March 18th, 20243 min read
Challenges in Family Business Succession

Studying failure is far better than studying success because it’s easier to avoid doing the wrong things than mimic the good that others are doing. Here are some of the ways things can go awry:

Families and businesses don’t grow at the same rate. From the third (and sometimes second) generation onwards, the family often grows faster than the business. What happens if many family members look to the business for employment or supplementary income?

Many owners maintain control by appointing only family members or close friends to their boards. This lead to the common problem of familiarity – where personal issues seep into the business, and where friends and family may tell the owner(s) what they want to hear instead of what they need to hear.

Policies regarding in-laws are a huge challenge and families tend to have polarizing views as to whether they are in favour or totally against. Whatever the policy, it’s important to welcome and evaluate in-law children as a spouse, not as an employee. It can be very difficult to remain business partners following a divorce – the worst-case scenario is that it the business needs to be sold to split the proceeds.

Working with relatives is a double-edged sword: it can generate much higher levels of trust and commitment, but it can also lead to tensions, festering resentments and open conflict. “It’s difficult when your dad isn’t only your dad, but your boss too.”

A recent study found that more than half of family businesses lack a succession plan. In too many family businesses, succession discussions are forced in that parents not wanting to inflame sibling rivalries leave it to the last possible moment to work through. A crisis, such as a major illness, is often the catalyst for a discussion that is by then often too late.

Consider This: Do you see any of these issues occurring within your family business? Is there a forum where you can discuss and seek to resolve or mitigate such challenges? Are there barriers to getting help in the first place?

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