“Call it a clan, call it a network, call it a tribe, and call it a family. Whatever you call it, whoever you are, you need one.”

- Jane Howard author of “Families”

Question from one of our readers:

“In your experience what are the major threats facing the future of families in business?”

The answer to your question is more complicated than you may have considered. Certainly one of the answers deals with the current economy. How families in business conserve their financial resources, sock away cash and aggressively pursue revenue streams will determine their chances of survival and future growth. The proper planning with the right people involved can substantially lower this threat. One person making the decisions with little or no input from others usually dooms the business to failure and creates tension in the family.

The realization that the current owners cannot be replaced is another major threat to family business survival. Too often the senior generation withholds information from the next generation concerning many of the “behind the scenes” responsibilities of ownership. Responsibilities like: understanding debt service, cash flow management, decisions using the financials, people development and general information concerning working with the banks, insurance companies and attorneys. Regular meetings for just this purpose should be scheduled and treated as the most important meeting of the day. If it is not scheduled and committed to by all family members, it just doesn’t happen.

Poor communication is always one of the top 5 threats facing families in business. Most families have a difficult time moving their communication from a parent/child form, to an adult parent/adult child format. Many families really don’t take the time to get to know one another as adults. Adult children are not the same as they were when they were kids yet many times they are still thought of in that fashion. In the same manner many adult children still view their parents from the eyes of a 10 year old. Because of the way the generations view one another threats arise that disrupt honest communication. These threats real or perceived, usually give rise to self-serving egos, a reluctance to confront conflict in an effective way, and the continued dragging of emotional baggage into the business environment. The result is usually very strained inter-personal relationships and poor business communication. We have discovered that of the 2/3rds of the family businesses that fail in the second generation, less than 10% are due to financial reasons. The biggest factor of the 90% failures are the lack of the proper, effective, mature, and respectful addressing of all of the personal issues present when family members work together.

We highly recommend that family members set aside some one-on-one time to improve their adult to adult communication. We have found this strategy extremely effective in allowing a new respect to grow among family members.

Another threat is the failure to have a clear, written succession plan in which all family members are involved. It is always surprising to us how many senior generations have not passed on any ownership to the next generation because of fear of loss of control, the desire to be equal but don’t know how to accomplish it or because, “They (the children) just are not ready yet.” Many of the next generation “that are not ready yet” have been involved in the family business for 10, 20 and yes even 30 years!

A lack of roles and rules, not verbalizing value guides, failure to find the right blending of personal and business issues and not keeping the extended families up to date on what is going on with the company, round out the key emotional issues that are major threats to the family in business.

Over the years we continue to find that those families who openly care for one another, who always consider how other family members will react to what “I” say or do, and are not afraid to use a four letter word, “love,” make better decisions together, grow the company, reduce interpersonal stress and conflict and build a real legacy for future generations.

How well are you doing?

Give us a call. We can help!

P.S. We have discovered that a Prevue Newsletter went out to our monthly newsletter addressee’s. It has been corrected. We apologize for this inconvenience.

If you have any comments concerning this newsletter or any family business issue, e-mail us at:

jim@challengesinc.com