Mixing family and business is dangerous. Family relationships are placed at risk; the company can be placed at risk; even lives can be placed at risk.
Don’t do it without understanding the risks and preparing for them. And if you think the reference to placing life at risk is an exaggeration, here’s a true-life story that may change your mind. Only names and places have been changed.
Joe always wanted to farm. After 10 years in the city, he bought a small Highveld property and he and his wife started their lives as farmers. Their vegetable crops flourished, the economy was booming and they couldn’t keep up with demand.
Debts were paid, more land was bought, and they were blessed with a son and two daughters.
Jack, their son, never considered any future other than farming and joined his father directly after finishing school. Tragically, Joe died suddenly three years later, but thanks to excellent estate planning, his wife and children were well and fairly provided for.
Jack proved to be a talented entrepreneur. The business thrived and the family grew. Jack and his wife had a son and a daughter, and his sisters each had three children. They often got together socially and it was truly one big happy family.
Lack of succession planning
Unfortunately, Jack gave no attention to preparing a successor. His son, Philip, was intelligent, sensitive and charming, and the obvious choice. But despite his desire to go to university, Jack insisted that Philip return to the farm immediately after school, as he had done.
His sisters disagreed. Strong words followed and relationships became strained. The happy family gatherings came to an end.
Jack soon appointed Philip as ‘general manager’, but gave him no meaningful responsibility. He continued to make all the decisions and Philip operated, in effect, as his personal assistant.
This was obvious to everyone, and Jack’s sisters grew more and more concerned about the future of the business. Then Jack died of a stroke and Philip was thrown into the hot seat.
At first all went well, but as time went on, the business started going downhill. Extravagant capital expenditure decisions were made and, as bad luck would have it, weather conditions caused crop loss at the same time as the local economy deteriorated.
The situation called for tough leadership and bold decisions, and Philip could not cope. He had a nervous breakdown and was hospitalised. Soon afterwards, he went back to work.
Then the unthinkable happened: he committed suicide. The business survived, but at the cost of a profound tragedy for the family.
Family relationships are emotionally driven. The family is an inward-looking unit, unconditionally caring for its own, aggressively protecting low achievers, and often blind to the shortcomings of its members.
It’s averse to change, avoids risk, recruits family first, and its members recognise and defer to older family members.
By contrast, business is unemotional and outward-looking. It realistically assesses performance and either rewards or punishes it. Business cares only for those who advance its interests; it embraces change, takes risks, appoints the best person for the job, and employees defer to senior managers irrespective of age.
When one’s nearest and dearest are mixed up in a family-owned business, unlike most other non-family corporations, one has to deal with sibling rivalry, family conflict, personal agendas, inter-generational issues, and complex or reluctant family succession.
Nevertheless, most successful companies start as family businesses and bring enduring joy to the family. But it doesn’t happen without blood, sweat and tears, and without moulding the two opposing systems into one.