{"id":2956,"date":"2021-07-27T18:44:15","date_gmt":"2021-07-27T18:44:15","guid":{"rendered":"https:\/\/duganlopatka.com\/?p=2956"},"modified":"2022-10-12T20:58:48","modified_gmt":"2022-10-12T20:58:48","slug":"a-family-business-is-just-business-until-it-isnt","status":"publish","type":"post","link":"https:\/\/www.duganlopatka.com\/a-family-business-is-just-business-until-it-isnt\/","title":{"rendered":"A family business is just business… until it isn\u2019t."},"content":{"rendered":"

We explore the unique and complex dynamics of running a family business and explore how Jeff Wisdom, equipped with the right tools and guidance, transformed his 140-year-old company into a successful industry leader.<\/span><\/em><\/h4>\n

There\u2019s a scene in the first episode of HBO\u2019s Succession<\/em> in which Logan Roy, patriarch of the Roy media enterprise, announces that he\u2019ll be stepping down as CEO and bestowing the title on his son, Kendall, the heir apparent. That\u2019s what\u2019s supposed to happen, anyway.<\/p>\n

It\u2019s Logan\u2019s 80th<\/sup> birthday. He\u2019s in failing health, and his sons and daughters and their spouses\u2014a mixed bag of characters who are each toxic in their own special way\u2014are spending the day lavishing gifts and praise on the old man, hoping to get a piece of the family pie. Of course, as is often the case in the TV world and the real world alike, things don\u2019t go according to plan. In the midst of the celebration, Logan pulls the family aside and announces that he will remain CEO. Chaos ensues. And, as you might expect, things don\u2019t exactly get better from there.<\/p>\n

When he decides to remain CEO despite his age and health, Logan isn\u2019t making a rational <\/em>decision. He\u2019s operating on raw emotion. Unfortunately, the family has allowed their company to be run this way and hasn\u2019t taken any steps to install proper checks and balances. Now, it\u2019s coming back to haunt them.<\/p>\n

The entire show is a rebuke of the idea that any <\/em>business, particularly one owned and operated by a family, is ever \u201cjust business,\u201d a phrase suggesting that a family\u2019s business decisions can somehow be removed from personal feelings. They can\u2019t. The Roys are finding this out the hard way.<\/p>\n

In the business world, people sometimes imagine that their actions are removed from their emotions. But that\u2019s rarely the case, especially for family-owned businesses where personal finances are often tied directly to company financials and people related by blood hold positions of power. A business is ultimately a collective of people, and a family business is a collective of people with deep emotional ties, both positive and negative, which can result in decisions that are clearly bad for business. Wherever people are, emotion follows.<\/p>\n

And wherever emotion meets business, new challenges emerge.<\/p>\n

What makes running a family business uniquely challenging?<\/h3>\n

The Roy family crisis is more than just good TV. They may be a uniquely hostile bunch, but the challenges they face, from succession planning (or lack thereof) to corporate governance (ditto), are the same challenges that real family-owned businesses encounter every day. And it\u2019s not just the giant corporations. Our team works mostly with mid-sized organizations, and new clients often come to us because they\u2019re experiencing these very challenges.<\/p>\n

What makes running a family business uniquely difficult is that you have to make all the tough decisions required of any business while also reckoning with the emotional baggage of a family enterprise.<\/p>\n

\"family<\/p>\n

Take succession planning<\/strong>, for example. In a business, any rational stakeholder should, in theory, want<\/em> to have a succession plan; it\u2019s critical to the continued health and fundamental stability of the enterprise. Then why do so many business leaders fail to plan for succession? Why are they being so irrational?<\/p>\n

In truth, they aren\u2019t being irrational. They\u2019re just operating on an emotional<\/em> rationality, rather than a business one. The act of planning a succession is more than a cool-headed business maneuver; it\u2019s an acknowledgement of an uncomfortable truth, the reality that the current leader of the company, who may be a parent, sibling or other relative, is eventually going to be unable to lead, possibly due to death or illness. It\u2019s the kind of conversation\u2014like discussing a will\u2014that people tend to avoid. As long as you don\u2019t talk about succession, you won\u2019t have to think about its implications. And that\u2019s completely understandable. Unfortunately, the consequences of avoiding these tough discussions can be disastrous for businesses and families alike (just watch any episode of Succession<\/em>).<\/p>\n

There are other challenges common to family businesses:<\/p>\n

    \n
  • Informal culture and structure<\/strong>. While having a laid-back culture can be a good thing, an overly informal structure can lead to a lack of controls, documentation, policies and procedures. Bringing formality to your company can be awkward, at first\u2014these are more than colleagues; these are people you open presents with on Christmas morning\u2014but it\u2019s the only way to maximize your company\u2019s efficiency.<\/li>\n
  • Funding growth<\/strong>. Growing a business takes capital. But deciding where that investment comes from and how it\u2019s used can cause tension. What happens when your brother, who\u2019s not involved in the management of the business and relies on dividends, receives less income because you decided to reinvest resources in the organization? Well, he gets mad, of course, and now you have to choose between pleasing your brother or doing what\u2019s best for the business.<\/li>\n
  • Business valuation and ownership.<\/strong> The owners of a family business may not agree on the valuation of the business or how to split the ownership. Like the other points mentioned here, this business disagreement can spill over into personal tension, and vice versa.<\/li>\n
  • Growing and evolving the business.<\/strong> Many family-owned businesses are \u201cstuck in their ways,” with older generations still influencing decisions. It can be easy to blame the patriarch or matriarch, but try seeing it from their perspective. They\u2019ve dedicated a good deal of their life to this business; it isn\u2019t easy to accept radical change or hand over authority to someone they raised.<\/li>\n
  • Delegating responsibility.<\/strong> This is a common issue in businesses with loose organizational structure. One person, usually the person who should be focusing on the overarching vision and direction of the company, is the CEO and the production manager and the CFO and on and on… until they\u2019re spread so thin that they can\u2019t really be effective. Managing all those responsibilities, they certainly won\u2019t have time for the big picture.<\/li>\n
  • Saying \u201cno.\u201d <\/strong>This is a broad generalization, but anyone who has worked for a family business knows that it can be very hard to tell a family member that they aren\u2019t going to get their way. You care about this person, you don\u2019t want to anger them, and you\u2019re aware that you\u2019re probably going to have to reckon with this decision in your personal life. It can be tough to say \u201cno\u201d to colleagues, in general, but those with a business background can do it, when necessary. Once family is introduced to the equation, all bets are off.<\/li>\n<\/ul>\n

    \"Family<\/p>\n

    With that said, there are also benefits to running a family business: You get to spend more time with your family (could be a positive or a negative). There\u2019s often a strong and personal sense of pride in the company\u2019s success. A positive business environment can actually bring family members closer<\/em> together. And the business, if managed responsibly, can secure the finances of future generations.<\/p>\n

    Recently, we sat down with Jeff Wisdom, a business leader who can speak to both the challenges and the benefits of running a fifth-generation family business. Here\u2019s what he had to say:<\/p>\n

    How a 140-year-old family business became an effective, agile innovator<\/h3>\n