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The Benefits and Hazards of Working in a Family Business

Having it both ways – a successful business and a happy family
By Buddy Smith

Convention SpeakerBRIn 1989, my father gained ownership of Carolina Material Handling Services. At the time, I was working in the banking industry and within a few months he approached me and asked if I would join him and my brother in the company. In the 26 years I spent working with my family business, I learned a lot about the dynamics at play in a family-owned business.

A family owned business has its advantages and disadvantages. Navigating through the potential landmines successfully can be the difference in not only running a successful business but enjoying a quality family life as well. There is a term “familiarity breeds contempt” and while that is not always the case, it is certainly a concern that can present itself in a family business. For me, the biggest lesson that I learned from working in a family-business is that there are some conversations that must take place before making that commitment. While these conversations can be uncomfortable at times, the business and the family will both be better off in the long run if they take place before going into business, as opposed to after the first problem arises.

There is no reason why a family can’t operate together and have a successful business and a successful family life. However, there are tools and principles that have to be intentional and omnipresent to make that happen.

Communication Is Vital
Buddy Smith FamilyOne thing that I have experienced and seen other companies experience is the dynamics of the family carrying over into the business. Whatever the dynamics were growing up and how the family communicated and who had different roles in the family tend to show through when running a business. When you bring people who have grown up together and developed communication habits that may be normal in a family environment they often don’t translate to a business environment.

There are a lot of heightened emotions in a family. A lot of anxiety. And sometimes in a business environment when the pressure is on and tense discussions happen, anxiety and emotions are heightened. That’s the opposite of how good business gets done. Good decisions are made in calm, clear-headed, logical thinking environments.

But just as having a blow up argument is damaging for business, so too is closing off. Many people, myself included, have a tendency to shut down and withdraw into their own heads when things get personal, rather than have a conversation with a family member and get things out in the open. You have to fight that isolation and learn to talk to co-workers (because this is what you are at work) in a productive way. A book that I read that helped me tremendously in that respect is called Conversational Capacity By Craig Weber. The book talks about how to have open, balanced, non-defensive dialogue about difficult subjects. If you can do that with family members, then magic starts to happen. A lot of times, especially with those we love, we hear somebody with a different opinion and perceive it as a personal attack. You can’t make progress that way.

Eschewing Generational Dynamics
Another family dynamic that is sometimes difficult to overcome is the dynamic between generations. It’s not easy for a father to think of a son or daughter as an adult. I have children in their mid 20s and that urge to protect them never leaves. But one of the biggest problems that family businesses face comes from the parent-child relationship.

When a child enters the family business, a couple of things need to happen. First, the child must be qualified to work in the business. The business doesn’t exist to provide jobs for family members that need jobs. Once you’ve determined that the child is qualified to work in the business, you must accept that that child is an adult that can handle the responsibility that comes with the title. As they have gotten older, I believe my children crave an adult-to-adult relationship with me rather than a parent-child relationship. Sadly, many parents are unable to make this transition. An adult-to-adult relationship with our children works much better in a family owned business.

Both sides must be clear about the expectations before accepting the job. This goes back to the communication aspect. There must be open and honest dialogue from all parties before entering into the business so that there can be no surprises once work begins.

Bring In Outsiders
For our company, we started to click when we brought senior level managers from outside the family into the business. Not only can they provide an outside perspective on business, which is important for decisions when family members may be “too close” to the issue, but they can also provide a buffer of sorts. As much as possible, we try to avoid having one family member report to another. Having managers from outside of the company provided objectivity to the situation and avoided potential confrontation resulting from a power dynamic within the family.

We even brought in a family business consultant to aid with a long-term vision and transition plan. The consultant came in and sat with each member of the family individually to discuss the business and the family dynamic within the company. Once he had spoken with all of us, he convened us all together and said, “Here is what you told me.” That was a really enlightening conversation. We learned that my brother didn’t really want to be in the family business or in the material handling industry at all. We learned that my father was very close to being ready to retire and wanted to start transitioning out of the company. And everyone learned that I had the ambition to buy the company and run it when that time came. These were conversations that we didn’t have with each other. It took bringing an outside perspective in to start to have these very important conversations.

The Advantages
We just used a lot of ink discussing the potential pitfalls of working in a family business. But it’s by no means all negative. With the proper precautions in place, working with family members can be a very rewarding experience. The tendency to takings personally within a family can be a real asset, as family members feel more invested in the company. There’s an added emotional motivation. There is also the knowledge base passed from generation to generation. My father, though he is no longer in the business is someone I can use for advice. That continuity from generation to generation is a definite advantage of a family business.

There is no one “right way” to run a family business. Every family is unique just as every business is unique. But from my personal experience, there must be guidelines and principles in place for a family business to be successful.