Per­sonal fam­ily busi­ness

Finweek English Edition - - BUSINESS -

Less than a third of fam­ily busi­nesses suc­ceed in the sec­ond gen­er­a­tion. One fac­tor lead­ing to their demise re­sult from con­flict­ing mind­sets and emo­tions ei­ther be­tween par­ents and chil­dren or be­tween sib­lings. In this col­umn, we look at gen­er­a­tional conf lict be­tween the par­ent and the child, and share a few ideas on how to deal with it.

Con­flict­ing mind­sets re­gard­ing the build­ing of the fam­ily busi­ness will tear both the fam­ily and the busi­ness apart. The re­sult­ing pas­sive-ag­gres­sive or con­fronta­tional be­hav­iour cre­ates an en­vi­ron­ment where e mploye e s a r e left un­com­fort­able, cus­tomers get fed up and sup­pli­ers lose con­fi­dence. Such a sit­u­a­tion is in­cred­i­bly emo­tional and any­one who dares ap­proach the fam­ily on this is of­ten in for a se­vere tongue-lash­ing.

Un­pack­ing the mind­sets and then find­ing a res­o­lu­tion to build the busi­ness is a big part of the so­lu­tion to this prob­lem.

First, the found­ing par­ent may see the busi­ness as a pen­sion. As the par­ent gets older, they ex­tract more and more in­come from the busi­ness in or­der to live as they have no alternative in­come.

Sec­ond, the found­ing par­ent may want to keep the busi­ness in the fam­ily, and there is most likely no suc­ces­sion plan in place.

Lastly, the busi­ness was most likely never built into an as­set of value, mean­ing that the value of the busi­ness sub­sists in the in­di­vid­u­als rather than in the busi­ness it­self, mak­ing it dif­fi­cult to pass on the value to the next gen­er­a­tion.

The child adopts one of two views. Ei­ther the op­por­tu­nity cost, driven by duty, of join­ing the busi­ness leads to frus­tra­tions be­cause the child is pre­vented by a ner­vous par­ent from ex­press­ing their po­ten­tial or the child is ar­ro­gant and feels en­ti­tled, tak­ing the fact that they will even­tu­ally own and run the busi­ness for granted. Both take a toll on the busi­ness and es­pe­cially the fam­ily unit!

While the so­lu­tion is ob­vi­ous, im­ple­men­ta­tion is plagued with the bag­gage of fam­ily his­tory and emo­tion. It is fur­ther en­cum­bered by fam­ily re­la­tion­ships, where mem­bers are of­ten not con­scious of the fact that their be­hav­iour may be caus­ing of­fence.

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