Sins in Family Business
as there are unique problems in publicly-held firms, there are
challenges that are just as unique in family-owned and operated
businesses. All companies
have strengths, but the secret to both profitability and perpetuation
is a willingness to step up to the plate and deal with each business
and family issue in a professional manner.
I write this article, I’m using my experiences as a consultant to
family-owned businesses as well as information I have been taught in
family business seminars and workshops that I’ve attended over the
years. My purpose is two
fold: The first is to
bring these “deadly sins” to the attention of family members who
have perhaps not yet been exposed to them, and secondly, to offer
recommended solutions. No
matter how bad business problems sometimes seem, it’s rarely too
late for a full recovery.
Deadly Sin #1:
“Daddy” Dominance –
In most family businesses, there’s a “daddy” who is actively
involved. Sometimes he’s
first generation, but he could also be second, third, and sometimes
forth. “Daddy” is
often highly reluctant to let go of the reins.
“boys” or the “kids” are all too frequently little more than
“hired hands” because only “daddy” is qualified to make the
important decisions. And
although some of these “kids” are well into their forties and
fifties, to “daddy” they are and will perhaps always be
The father — the patriarch of the family — can never be
assured that either the business will survive him or his offspring
will survive him in management unless he systematically gives up his
“important” jobs and delegates them to a qualified subordinate.
“daddy” may perform these duties better than anyone else, but no
one will ever approach his level of expertise unless he gives them a
chance. And to do that, he
must allow someone else to now and then make a mistake or two.
He must be willing to make the transition from player to coach.
doesn’t really matter where he begins in this process, but the point
is that he must begin to delegate key projects or duties.
It can be preparing the company’s annual budget or profit
plan, making credit decisions, assuming responsibility for banking
relations, participating in purchasing decisions, pricing, hiring or
managing sales. But well
before “daddy” plans to retire, a competent successor must have
proven that he or she can perform each of these functions.
Deadly Sin #2:
Refusing to Set a Retirement Date
– If “daddy,” or whoever is the CEO of the family business,
strongly resists establishing a retirement date, the likelihood
increases that he never will. He
will die with his boots on. He
will have convinced everyone in the company that he simply cannot bear
the thought of retiring because sitting at the helm of the family
business has been his life and his identify for so many years.
recommend that any owner/manager who is fifty-five years of age or
older, set a retirement date as soon as possible.
And those younger than fifty-five should also set a retirement
date if they plan to retire before reaching 65.
course, setting a retirement date is not sufficient in and of itself.
The CEO must take enough proactive steps so that it’s clear
to all concerned that management changes are eminent, although not
are several reasons for this recommendation.
Employees deserve to know what’s beyond the horizon for them.
Just about all employees suffer some degree of fear down deep
inside that when the “old man” dies that the business will go down
the tubes. And it’s
difficult to recruit top talent into a company that doesn’t have a
succession plan in place.
Set a retirement date and name a successor.
In the absence of both, there will always be doubt that the CEO
is really serious about retiring.
naming a successor, a lot of apprehension is lifted.
Both family members and non family members will at least
realize that there is a good possibility that the business will
survive the current CEO.
Deadly Sin #3:
Embarrassed to Name a Non Family Member as Successor.
If the retiring owner does not genuinely believe that one of
his offspring has the “right stuff” to succeed him, he owes it to
both the family and to the employees to tap a qualified successor from
outside the family ranks. And
oftentimes, this individual must be recruited from outside the
example of this principle was executed quite a few years ago at Ford
Motor Company. Although
since the inception of the company a member of the Ford family had
often been at the helm, the family and board of directors was willing
to recruit Lee Iococca when there was no member of the Ford family who
measured up to the requirements of the job.
As a result of the momentum the company gained under
Iococca’s watch, Ford Motor Company’s sales and earnings have
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