Family Business Problems And Where To Find Them

Family businesses, when considered a sector unto themselves, are somewhat strange beasts: rather than being united by an activity, a regulator, or a product type, what unites them is how they're made up. As a result, it's generally more difficult to pin down the types of problems they face, even though they do tend to grapple with similar problems on account of traceable anomalies in the nature of kinships. In this article we will explore these challenges, and discuss how to locate them and what to do about them.

The seven systems

Rather than merely thinking in departmental silos such as compliance, HR, tax, and so on, it's useful to also consider wider systems within family businesses, and how emotional riptides can affect them. In particular, there are seven key ones to mention: assurance, governance, growth, philanthropy, exit strategies, wealth preservation, and succession.

For example, how do the emotions of family relationships affect succession? In one family, we discovered that the founder didn't want to pass the reins over to his daughter because he was unsure of her abilities, and was furthermore concerned that the controller of the company had too much influence over her. This not only affected his relationship with his daughter, but also with the controller; it may have caused him to hold onto the company longer than he wished to, and put a film of hesitation over some of his actions.

However, discovering these concerns wasn't a simple task of asking the founder. In non-family businesses, it's perhaps easier to be more finance-centric, to think only of shareholders, profit projections, and dividends. But when you have your daughter's success and your own legacy informing those factors additionally, it becomes harder to speak and think plainly. Indeed, perhaps the founder didn't realise himself that he had these particular misgivings. Only through a series of questions we've designed for the purpose did we discover what was really driving the conflict.

Ultimately, the remedy in this case was a customised grooming process for the daughter, as well as new governance and assurance procedures being put in place. We are happy to report that these actions resulted in a successful transition and a happy retirement for...