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Solving problems in family business: five key questions

Jane Hilburt-Davis is founding principal of Key Resources in Boston, MA, a consulting firm that specialises in family-owned and closely-held businesses. Her expertise is in the areas of family systems, conflict management and professionalising the family firm.

W Gibb Dyer, Jr is the O Leslie Stone Professor in the Marriott School of Management at Brigham Young University. His expertise is in the areas of family business, entrepreneurship and organisational change.
The authors have also co-authored a book entitled Consulting to Family Businesses, published by Jossey-Bass/Wiley (2003).

Problems in family businesses can be multi-layered and can become increasingly complex if the correct questions are not addressed to ascertain the root of the problem

During the last several decades or so, scientific thinking about living systems has been creating ripples and raising questions in the studies of both families and businesses. This new thinking sees families and businesses as complex, many-layered living systems and challenges us to look beneath the surface of the behaviour or events that are visible. What we can't see are the causes, the history, the patterns of behaviour that keep the problems going. These dynamics must be understood before we can solve any problem. For example, what may look like a financial problem on the surface may really be about loyalty and love. What may appear to be a legal issue is often an inability or unwillingness to compromise or communicate, and what looks like an inability to resolve conflict may, in fact, be about loss or grief that has never found closure.

In order for you as the leader or a member of a family business to tackle the complex, multi-layered problems of family businesses, you need to ask the right questions about them. Don't take things at face value, ever!

John's quandary
At age 75, John* has worked in the jewellery business for almost 50 years. He first worked with his uncle, and then opened his own store 45 years ago. Over the years, the business has grown and John now owns a total of eight stores with total annual sales of approximately US$19 million. John's wife Shirley died six years ago after battling cancer for two years. John was considering 'cutting back' when Shirley became ill. He was devastated by her death and changed his mind about retiring. He was left wondering, "What should I do with all this time on my hands?" He and Shirley had planned to move to their seaside home in Florida but now John can't bear to be there and be reminded of her and the life they had together.

His sons, Mark, 48, and Steve, 44, are in the business. Mark is the general manager and Steve is in charge of marketing and sales. John is president and owns all the equity in the company. Although he has told everyone that Mark will succeed him as president, he has not done any formal succession or estate planning, either in terms of ownership or management transitions. The brothers argue constantly in the office and they each report every argument to John, who tries to resolve their disagreements, usually without success. John says that the current conflicts are "killing him" and can't even think about succession planning until his sons begin to act more "like adults" and get along better. The non-family employees are often dragged into the siblings' battles and report that morale is at an all time low.

John comes to the office every day even though he no longer has any formal duties. Mark notes that John is "driving me nuts" because he still wants to be involved in day-to-day operations.  In spite of all this, the business continues to expand and be profitable, providing a good living for John and his two sons and their families. But the family issues are beginning to spill over into the business. The manager of one of the stores, Tom, who has been with the company for 15 years, is now threatening to leave. The HR director has tried to get the brothers to hold executive management meetings but each one ends in an argument. John has little in savings or retirement; his assets are all in the business and real estate. His attorney, David, has worked with him for 30 years and has given up trying to get him to create an estate plan. Over the years, John has made secret deals with his kids, loaning them money whenever they ask. He says he just "can't say no" even though he fears that Mark, who has just asked him for a $21,000 loan, has a gambling problem.

Now that you have read about John, ask yourself the following five questions. Asking these questions often gives leaders, managers and members of family businesses greater insight into their problems and can point to the next steps to take in solving them.

What is the real problem?
Often what people describe as the problem is only a symptom. If you focus on the symptom without uncovering the real problem, you are wasting your time and are bound to fail. A doctor does not only treat the rash, but conducts a series of tests to find out what is causing it. That is exactly what you must do with what looks like the real problem. John would say that the real problem was his sons' fighting; his sons would say it was their father's unwillingness to consider succession planning. A simple exercise, process mapping, can help you understand if, in fact, these fights are not only the tip of the iceberg, but also the whole picture.

Process mapping is a technique, from systems thinking, of drawing a picture of feedback loops, or behavioural interactions, in which the actions and reactions of individuals are inextricably intertwined. Identifying these transactions is critical to understanding what keeps a problem recurring. We don't know, at this point, what caused the fights, what started first, and what determines the end and beginning of the interaction. We can only speculate and describe the sequence of events. These observations enable us to think in patterns of behaviour that repeat themselves over time, over generations, over a lifetime. However, it is critical to take the long view and offer a fresh perspective on old problems.

Uncovering this 'vicious circle' of reinforcing behaviors and responses is the key to understanding the problems and developing strategies to break these negative cycles.

Some of the questions used to uncover feedback loops in John's family included:

- What do you (the son) do when John begins to interfere?
- What do you think John thinks when he sees his sons fighting?
- What does Steve do when Mark goes to John for money?

As you get a clearer picture of this and if John can stop reacting to his son's fighting and his sons can stop reacting to John's reactions, progress is made. However, problems in family businesses are rarely this simple or easy to solve.

How long has this problem existed?
Problems manifest themselves in three ways: (a) same old stuff; (b) something brand new; and (c) same old stuff in a new package. If the symptom has persisted for a long time, it reflects a deeper problem embedded in the system. If the symptom is new, with a short history, deal with it first, since its cause will likely be the easiest to diagnose and may help in uncovering the source of other, more entrenched problems. In John's case, we learn that Mark and Steve were always competitive but the real fighting started a few years ago after three things happened: Shirley died; John spent more time at the office; and Mark's gambling increased.

Is the problem related to some 'unfinished business'?
All living systems, including individuals, families and businesses, go through life cycles and crises. Family businesses evolve over time. All too often problems are the result of avoiding the communication and tasks that are necessary to move to the next stage. Each change in a system produces disruptions in patterns. If emotional processes aren't managed during such disruptions, the negative effects may be felt over time and over many generations. In John's case, it would be important to determine how much of his inability to hand over the business is related to unprocessed grief over the loss of Shirley. He is not able to let go and to allow the next generation to take over. It is widely accepted among family therapists that unresolved losses and grieving are related to ongoing conflict in succeeding generations. His inability to come to some acceptance of his being without Shirley is related to his holding on to the company and his sons.

Where is the most energy for change?
Energy implies possibilities for change. How does the energy present itself and what does it look like? It can appear in many forms – anger, excitement, frustration, enthusiasm, pain, or a combination. Where is the energy located? It can be in a person of authority, in a subordinate or in an alliance among members of the family business system. Your chances for success are obviously greater if the energy for change is with a person in a position of formal authority; in this case, John. Often, however, with succession issues, the motivation for change is in the succeeding generation, which is highly motivated but often without much formal authority. Understanding how the whole system works and appreciating the concept of leverage can help you create changes that are positive for the family and the business and get 'buy in' from the key people.

Does the problem serve a function?
Problems often play important roles in systems. A classic example is 'scapegoating' or 'dumping' problems onto a person or group of people. If one person or group is frequently blamed, the first question to ask is: does he/she deserve this? If the answer is "yes", then the work is with that person. If the answer is "no", then the work is with the system. Then ask: what would happen if the scapegoat were fired or cut off from the family? Would the problems remain? There are many reasons for scapegoating but the most common in family business systems are unresolved conflicts, work avoidance and denial of important business decisions to be made. The question then becomes "who can we blame?" rather than "how can we fix this?" Problems are powerful forces in systems and can play a useful, often destructive, role. Do your homework. Be prepared for the fallout if the problem is removed without repairing the underlying structure.

After you have asked yourself these questions, you should have gained some insight into what to do next. If your problem is new, you may only need to call a meeting of the family and have a frank discussion. However, if the real problem lies underneath the surface, you may need to call in a professional to help you solve it. You may want to consider a trained and experienced family business consultant with the relevant specialised skills.

Problems often don't get the respect they deserve. They usually play important roles in families and in the work place and are windows into solutions. Ask these critical questions before you rush in to fix things. Uncovering the answers will help find longer-term solutions with a buy-in from everyone.

(*Names and some facts have been altered for the purposes of this article.)

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