Businesses run by supportive family members have extra strengths rarely seen in non-family ventures.
- You can trust family
- Everyone has the same goals
- Father knows best - management is easier
During tough times, family ventures can tap into deeper levels of emotional attachment and commitment.
However, to have a successful family business you need to understand family dynamics and the nurturing conditions that maintain healthy and strong family bonds.
Building a family business and successfully passing it on to your children isn't always easy.
Statistics show that:
- About 30% of family businesses make it to the second generation
- 15% make it to the third generation
- Only 5% last to the fourth generation
Most family businesses fail for one or two reasons:
- Lack of attention to family dynamics
- Lack of transitional planning from one generation to the next
Wearing Different Hats
One thing that can really hinder a smooth transition and upset family dynamics is confusion over the different roles assumed by the parent who has a family business.
At any one time, they could be:
- Boss, and
Understanding how to keep these roles separate is key to reduced confusion and conflict.
When playing the role of parent, certain actions are key:
- Nurturing family members
- Preserving harmony
- Transmitting values
This means helping individuals develop successfully throughout their lives, reinforcing the bonds that exist among them, and passing on family traditions and values.
When wearing your boss or management hat, you should:
- Manage employees
- Motivate teamwork
- Develop and manage strategy and operational systems
This means, ideally, generating profits and competing effectively in the marketplace.
As the business owner, your role is to enhance the value of company assets and protect business values. As owner, you must act responsibly on behalf of all shareholders.
You must set ownership policies and ensure that wealth created within the company is managed effectively.
The following actions can help minimize confusion and conflict among the three roles:
- Understand and respect the purposes and responsibilities of each role
- Respect the unique aspirations and goals of each family member within each role
- Clarify the core values that bind together all three roles
If you need assistance with transitional or estate planning, contact our estate planning division.
Note: This article is based on a presentation by Dr. John G. Fast, Executive Director, Centre for Family Business, University of Waterloo. Dr Fast discussed family dynamics and their effect on transfer of a family business from one generation to the next.
FBC believes similar communication problems can apply to a business owned/managed by siblings rather than a parent.
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