Who’s Running This Ship, Anyway?

“The family business.”

That phrase is so iconic. It’s almost heart-warming.

And yet, many family businesses are flawed. Some are broken beyond repair. In my work, I’m inside family-owned businesses regularly and have gotten used to hearing hear the word “dysfunctional” … used by employees and the family members themselves.

Trouble is, the people in charge generally aren’t objective. It’s tough to deliver an unbiased opinion when you’re the problem.

It’s been said that every family has a black sheep. If you look around at a family gathering (or family business) and don’t see one, maybe it’s you.

I’ve observed – and have had this observation confirmed by dozens of people in and around family businesses – that one of the main sources of strife and mayhem is entitlement. Example: If the company is called Smithco and my name is Smith, I deserve a position of authority, a title, an office, plenty of respect, a portion of ownership and a lifetime income stream … regardless of my qualifications or performance.

In these companies, two or three generations of siblings and cousins run amok, issuing conflicting orders and consuming resources. Non-family employees can be excluded from management positions, or can have their authority diluted by one of Junior’s “great ideas.”

We’ve all heard the stories about family businesses big and small that have been tainted, if not ruined, by family conflict.

Here’s an approach several entrepreneurial families have adopted that makes a tremendous amount of common sense: A family “constitution.”

Some of the folks I’ve met don’t call it that, but what they all have in common – regardless of the terminology – is a discussion around who does what. That discussion leads to key decisions, with the outcome (hopefully) of a professionally-run, drama-free company.

In such scenarios, here are some agreements that get implemented. Each family member:

  • will not necessarily own shares in the company.
  • who owns shares may or may not have voting rights or a seat on the board.
  • will not necessarily have a job in the company.
  • who works in the company may or may be a manager.

In other words, the qualifications for both ownership and management positions extend beyond one’s last name. It’s a meritocracy, with the best-qualified people in each role.

You can see how much sense this makes, while simultaneously imagining the wailing and grinding of teeth that will occur while trying to gain Stanley’s buy-in. That’s the same Stanley who is 46 and has never held a “real” job other than the one created for him by Mom and Dad.

If you own a family business, consider the idea of a family constitution. It might solve what’s ailing the company. Better yet, it might head off problems before they start.