All in the Family (Businesses)
By Tom Ryan
While family-run businesses have created some of most innovative
retailers in the country, the way they’re run is often dysfunctional.
That’s
according to Jay Goltz, who’s writing a series for The New York Times exploring
the challenges of family-run businesses. Mr. Goltz grew up in a family business
and has launched five businesses on this own, including Jayson Home & Garden,
the Chicago-based home furnishings store and e-tailer. Asked by the Clinton
Foundation, he volunteered to act as an unpaid consultant for Chicago-based
Consolidated Printing, one of the pioneers of the “green” printing
industry, founded in 1973. While securing a loyal customer base, Consolidated
Printing’s organization was holding it back from fully capitalizing on its
reputation, Mr. Goltz contended.
Of the 12 employees, six are family members:
a daughter, a son, a son-in-law, a husband, a granddaughter and a grandson. “In
many ways, the family aspect of the business has served them well in that everyone
pitches in to get the job done,” wrote Mr. Goltz. “This can be a
real advantage, but it can also get in the way of building infrastructure.”
After
an initial meeting, Mr. Goltz said he believed that one issue facing the company
was that no clear person was in charge of day-to-day operations. This was a
particularl problem since founder Marilyn Jones serves as mother, grandma
and wife in other capacities to people within the company, while the other
potential leader, her son in law, Shane, serves as brother-in-law, husband,
father and uncle to others.
He remarked, “I told Marilyn that she needed to be the
boss at work, not Mom or Grandma or Sweetheart.”
The second issue concerned
standards, specifically who sets them and who monitors them. For instance,
Mr. Goltz wondered if Shane’s wife tended to side with her mother or her husband.
“At my business, I have learned how to get professional people to act
like family (in the positive sense). On the other hand, getting family members
to act like professionals can be a different story,” he said.
But he also
said setting standards helps identify which employees aren’t suited for particular
tasks.
“I suggested that when you enable relatives, you really aren’t
doing them any favors,” wrote Mr. Goltz. “And when you enable a relative
who is also an employee, you are also doing a disservice to the business —
as well as to the other employees.”
Finally, Mr. Goltz wrote that, with many
employees focused on finishing their specific tasks, no one is exploring the
big-picture view. He said with better priorities set, Consolidated Printing
can focus more on marketing to new customers.
“The company is stuck in a slow growth mode because the key people are
always working on the small picture,” said Mr. Goltz. “This is known
as working in the business instead of on the business.”
Discussion Questions: What are the overall pros and
cons of family-run businesses? What are some steps family-run businesses can
take to overcome potential organizational issues?
Everyone I’ve spoken with over the years says succession planning is one of the biggest issues.
I’ve seen many sad cases where a business is passed from the founding entrepreneur to the incompetent son or daughter, and things go to hell in a hurry. It has to be difficult, but some parents have to be more careful with succession. Family-run businesses where I’ve worked have also had a bit of a disadvantage in the seemingly inevitable grumbling, behind the scenes, by non-family members about how all the perks and good titles go to the family.
Family businesses can and do obviously work, but I think they have to work harder in some ways in order to succeed. That said, usually the founding entrepreneur is a driven workaholic, which generally gets things off to a nice start, but….
Is this really different than most businesses with power structure, clearly identified goals and boundaries? I don’t think so–a lot of top execs look the other way when they must make changes.
I’m thinking of S.C. Johnson and Cargill. Yes, family businesses can be made sustainable. You need successors who have immense pride in the family, the willingness and discipline to be trained beyond yesterday’s cusp, perseverance–and some darn good estate and tax lawyers.
We have consulted with very few family businesses and every time, it is a challenge. Every expenditure of money is like taking food off their dinner table. The decision process is not based on the business needs but more on how family members will be affected. Too many family members don’t want to be there and don’t want to work. We have seen family members paid to never set foot in the office. Succession is clearly a major issue with over 90% of businesses never making it to the next generation.
The real problem is organization, authority and responsibility. The founder wants one big happy family and does not want to hurt anyone’s feelings. In the end only the founder makes decisions and no one else is responsible for anything.
Sounds like Mr. Goltz is writing ABOUT the New York Times, not FOR it…but that’s probably another story.
Family businesses are some of the best, brightest, and strongest organizations in this, or any other country. When the paternal/maternal side thoughtfully discuss the vision, strategies, tactics, legacy, etc, of the enterprise at the dinner table, they are provided a great ‘leg-up’ on competitors. They also establish a free-flow of communication within the organization that moves throughout the enterprise.
The well-run companies/communicators consistently top their “corporate” cousins, who far too often are populated by executives who are too focused on building a career, rather than building a company/ideas to last for the next 100 years.
The most successful family-run businesses that I have worked with deal with two big issues as follows:
Issue 1 – the family member who does not pull their own weight. Solution – Outside productivity counsel for the entire organization and sometimes personal coaching for the “problem” person. Lots of different outcomes are possible, but doing nothing keeps the company and family in a stuck mode.
Issue 2 – Entitlement attitude of next generation family members. Solution – This begins early, with kids being given permission to make their own mark in the world, i.e., not groomed for the family company or especially told that they will be expected to take over for their workaholic parent(s). Those who work in the business from the ground up can definitely learn the business, but they can also learn how, and if, they fit. Those who strike out on their own are not necessarily gone for good. Returnees can bring new skills, perspectives and expertise that benefit the family business.
Let’s just say I have a psychotherapist friend whose entire practice is made up of people from family-owned businesses. Goltz is exactly right, generally they are slow moving at best and totally dysfunctional at worst. And most of the problems have nothing or very little to do with the actual business.
As an organizational psychologist I’ve been involved in getting businesses past family dysfunction to a truly innovative and profitable enterprise. The thing is the family pecking order (and there is always a pecking order) rules above talent, experience and intellect. Your parents never stop being your parents, your little sister will always be your little sister. You can pretend that’s not the case between 9 and 5 but you’re fooling yourself.
I was in a meeting with a family business in which the CEO was the 45 year-old son of the very omnipresent father-founder. The son was running the meeting as he should when the father barged in and literally took over disregarding whatever might have been going on. The CEO son acted like he was 13 being berated for not cutting the lawn like he was told to. That’s when, as a consultant, I ask myself what I’m doing there; nothing will change until dad dies – and that idea is really hard to work into a proposal.
Just to stir things up a little…in my experience, the three types of organizations almost immune to transformation and new possibilities are: 1) Religious organizations; 2) Universities; and 3) the aforementioned family run businesses.
Most of the comments regarding family businesses have to do with the negatives that can occur. While I agree that many of them can and do occur, it does mean a family business can not succeed. They can and do. What is does mean is that it takes extra work. As one would expect much of the extra work surrounds the dynamics of the family itself.
I agree with Jay in that family run businesses can be dysfunctional due to personalities and the unique nature of these life-long relationships. A family run business still takes leadership. Having researched and written a book, “Retail Superstars” myself on highly successful independent stores I have found that just as many family-run retailers have done a great job of dividing responsibilities and creating dynamic, growth-oriented cultures.
It can be done but it takes a great deal of work, discipline and people who genuinely care about the success of the business instead of their own personal needs and agenda.
There are problems in all types of businesses. Those of family run business are not necessarily worse or better, just different. This is interesting because I heard Mr. Goltz publicly bash any value of consultants in a presentation he did several years ago and now he is consulting for free, apparently to get information to write articles and a book.
It is not a business but a way of life from the old family farm to the family business. It cannot be judged with the same criteria that one judges a corporation, as the employees in a family business are loved, not just tolerated as a necessary nuisance.
The great advantage that family-run businesses have is their nimbleness. They are in a position to react quickly to almost any changes in the marketplace. Because they are by definition local, they can respond to competitive pressures or capitalize on short-term opportunities quickly and effectively.
Unfortunately, too many family run businesses give back that advantage because they are indecisive. Too often, they have not provided themselves the information they need to act on facts rather than hunches. Leadership is too often not clear cut. Decisions are made not because something is the right thing to do, but because it’s the only thing that can be agreed upon.
Too often, family run businesses are run like a family, and not a business.
In my experience the last line of the article is the most important–families working in the business instead of on the business. Typically families have developed a business because they have a passion for and are very good at something. Being good at something and running a profitable business are two entirely different activities. The families (and entrepreneurs in general) who succeed are those that embrace that reality and bring in the skill sets necessary to set up infrastructure, process, metrics, and long-term goals and strategies to achieve these goals. Those that don’t typically don’t survive.
With the supermarket business being comprised of numerous multi-generation owners, there are countless examples to cite. H-E-B in San Antonio is the best example of how to build, sustain, grow, and yes, transform a family business. When Foodland in Honolulu needed an infusion of new ideas, they sought a seasoned executive from a public company, offered them a competitive salary and slotted them into the COO role to drive lasting change, yet not command too much power like a CEO.
Oh boy, could I go on (and on and on…) about this one! But suffice it to say the telling part is what half of the phrase predominates: is it the “family” half or is it the “business” half? If it is the former, then the entity will be forever handicapped in efforts to find effective employees–how many people want to be, in effect, a step-child? And dependent on random luck that the gene pool has provided competence; if it is the latter, then the issue is largely irrelevant.
There must be a solid structure in place for a family owned and run business to succeed past the first generation. Everyone has a role and has to report to someone. No Mom or Granddad between 8 and 5.
Anyone remember the movie Avalon directed by Barry Levenson? The story of a close knit first generation family in the late 40’s who have a successful family run business. They lived and worked together as the business grew and thrived. As they became financially secure, the family moved to different parts of the city, getting together for holidays, etc. One Thanksgiving, one family member was late and the others had “cut the turkey without them.” That ended the family strength and the business was never the same.
Stein Mart is a family success story. The business started by Mr. and Mrs. Stein in the deep South and has grown to over 250 locations. It is still led by the son of the founders.
Having essentially grown up in the first half of my career in a family business, I have quite a bit of insight due to the various roles that I played within the organization over the years spent there. First and most importantly, which overrides all else, there was no mistake whatsoever whose name was on the front of the buildings. Period.
That said, it was an enormously gratifying and exceptional experience I wouldn’t trade for any other, considering my skill set today. Most of, if not my entire skill set has roots in my experiences there.
Learning to maneuver through a family business is as difficult for a non-family member as it is for a family member. Fortunately, for the most part everyone in the business was treated like family and remains so today even though the business has been gone for some time.
It unfortunately came to a tragic end due to holes within its succession planning. Even the best planning can have those when a loss is catastrophic.
All bad, or all good? There is no plain answer. Some of the best retailers in the country are family owned and considered of the best to work for of all companies. There is a lot to be said for that.
Mostly, if you can treat others like family successfully, it carries on to the customer as well. In my case, they felt part of the family just as much as we did.
All of the bad cases can be refuted with great examples. That’s the same with family itself. Just look at the divorce rate. Its about 50-50. If you land in one of the successful side of that equation it can be a great place to be.
Family run retailers are usually great in the 1st generation, good in the 2nd, and ugly in the 3rd. One thinks of Barney’s in New York or Goldblatt’s in Chicago. There must be hundreds more in the retail grave yard.
This phenomenon has more to do with the frantic pace of retail change than any fundamental law of family dynamics. The founder somehow was able to brilliantly interpret the market need and shape a retail concept to fit it. The successor milked the idea in honor of the brilliant founder. The grandchildren, competing for turf, were not empowered. Some saw the market change and wanted to change the legacy retail concept. Others blindly followed yesterday’s formula paying more attention to their dividend than the waning margin and comp sales. The result? Conflict, false starts, unfulfilled dreams, unrealized potential….fire sale.
The family nature of the business only exaccerbates the natural retail cyle.