Failure to manage the family relationships poses a great threat to the integrity of the business.

Inherit the Family Ties

Why would you seek a Family Business Psychologist?

By David A Kipper, Ph. D.

summary:

This article addresses some of the roots of the difficulties encountered by founders and members of family businesses. It explains why although the problem is always defined as one concerning 'money', the deep-rooted conflicts are actually psychological, that is, dissatisfying relationships. The article describes three typical major managerial challenges facing members of the family business especially its leadership. These are the challenge of managing the emotional ties, managing the relationships, and managing the passion for control.

The headline read "Herbert H. Haft who spent 50 years building a retail empire...ends in a four-year family feud". Haft owned the Dart Group Corp. Dart had ownership interests in a number of retail chains including Trak Auto, Crown Books and Shoppers Food Warehouse. But the family was best known for its legal battles after the founder fired his son Robert M. Haft. Robert successfully sued for wrongful-dismissal and was awarded $34 million.

This sad story is not uncommon. "We should have come to you first," said my client. "No wonder the legal solutions offered to us did not hold up for a long time. With all the anger we harbored and the mistrust we developed toward each other, it is not surprising that the business suffered so much." Another client said: "We have an idea how the money can be divided, but the family is torn apart." These and similar comments are common in our practice and they point to a fundamental issue that often tends to be overlooked or insufficiently appreciated: A failure to manage the family relationships, i.e., the emotional ties, poses a great threat to the integrity of the business. I belong to a growing group of family business consultants who specialize in areas that together are germane to the family business situation. We are clinical psychologists who specialize in group dynamics and have experience in consulting management development and business organization.

Owners of a family business face three challenges unique in their intensity and complexity. These are:

The challenge of managing the depth of their emotional ties to the business.
The challenge of managing the relationships, and
The challenge of managing their passion for independence and control.

Each of these challenges requires an understanding of human behavior and the delicate management of internal tendencies and interpersonal discords. This notwithstanding, it is not uncommon to find family business owners who tend to dismiss or overlook the role of the emotional components that characterize the family enterprise. Some view the intervention of a family business psychologist as a threat. Others wonder what a psychologist can bring to the table? "If disharmony among family business members is all about money," they say, "shouldn't a financial advisor or a lawyer be consulted? Why a psychologist?"

Actually, this question is perfectly logical, only its premise is flawed. It cannot be emphasized enough that in family run business money is more than just money. It cannot be detached from its effect on family life, and managing the business cannot be separated from its impact on family relationships.

The following will describe the characteristics of these three challenges. It will show how skillful management of these challenges might greatly benefit from the coaching and help of professional psychological consultants.

1. Managing the depth of the emotional ties to the business. One of the hallmarks of every family business is the central role of the emotional attachment to the enterprise. The most typical features involved in this challenge are as follows:

Self-worth. The family enterprise as an expression of the owner's sense of self-esteem.

For the successful owner of any family enterprise, and in particularly for its founder, the family business is a living testimony of his or her self-esteem and self-worth. There is a deep psychological bond between the success of the enterprise and the way its owners see themselves.

When leaders of a public corporation begin to "treat the business as if it were their family business" such a fusion between the leader's personal self and the impersonal nature of the enterprise may be a cause for concern. In the case of a family business, however, not only do deep self-needs and business practices mesh together, the absence of a clear divide between the emotional and the business aspect is expected and accepted. The inevitable result of such a fusion is that whenever the family enterprise faces the possibility of a business-management related change; it is interpreted as a personal threat. It touches upon the emotional security of the owners and, quite understandably, elicits resistance to change. Overcoming such resistance is a skill many of us seem to be lacking.

The Identity Fusion: The business as an extension of the parental role.

For the owners of a family enterprise the business becomes part of their identity. Witness the language and the words used when they talk about their business. A founder of a family business with a son in the business and a daughter, who is not, told me, "Actually, I have three children. The business is my third baby." A client contemplating his retirement from the business he founded (now mostly ran by a son), told me, "Look, for years the two main issues my wife and I talked about every night were our children and the business. Now I am about to be leaving the business. It is like being 'empty nesters' again." The depth of the owner's emotional connection to the business is expressed by addressing their business in terms of parenthood. Such an attitude creates a blurring of the boundaries between being in the role of the real life father and that of being a boss or a partner. This often results in the owner patronizing people as if they were their children, a behavior that elicits the wrong responses from both sides. Learning how to separate these two roles and learning how to shift from one role to the other when appropriate is a skill many have not mastered.

Family Legacy: The family enterprise as a commitment to family continuity.

For the second as well as for subsequent generations in the business the emotional aspect of their identity tends to shift focus and center on maintaining and continuing the family legacy. Family legacies are an emotional source of pride. Securing the continuation of a family enterprise is a personal need, almost as important as the wish to continue the family name or the family values. This is an issue that sometimes defies rationality. It evokes intense feelings about loyalty, betrayal or failure. "We are a 92 year old family business", said the President and CEO of a big company, "It will break my heart if we have to go out of business or even sell it".

2. The Challenge of Managing the Family Relationships. Family enterprises are collective undertakings. The behavior of one member, especially a central figure in the business, affects an entire network, namely, every other person in the immediate family. There are two important implications to this feature of the enterprise. One is that blood relationships turn out to be a factor in commercial decisions. Second, family members expect to be either contributors or beneficiaries (or both) of the business regardless of the size and importance of their input. In other words: people who manage the family business face dual managerial challenges that are closely intertwined. I recall the desperate complaint from a second-generation owner who inherited a business with two sisters and a number of cousins as shareholders. He said, "When I studied for my MBA it never dawned on me that I would have to manage the relationships in my weird extended family. I am not a shrink! I am a businessman. I do not know what to do with all my cousins' wives and husbands. Gee!" Of course he was absolutely right. Some of the issues involved in managing the relationships are as follows:

Entitlement and Contribution.

Chief Executive Officer Brian Caster (41)— son of Terrance Caster, the founder of the Caster Family Enterprises, a real estate development company in San Diego — has strict standards for hiring relatives. Of the close to 50 children and grandchildren of the founder, only two work in the business. Prior to formulating the hiring policy the business and the family were in turmoil. His formal hiring policy, however, "saved a tremendous amount of headache and time," he said.

But this is an uncommon situation. In the vast majority of family business, benefiting from the business is predicated on either blood (and marriage) kinship or on loyalties of many years to the founder. While professional competence and contribution to the success of the enterprise are important, it is not uncommon to see that sometimes they serve as secondary considerations. The prominence ascribed to entitlement and loyalty often cause very delicate situations and the older the business the more complicated they become. A client told me "My father has this old lawyer and accountant with whom he went to school as our paid outside board member. This is a joke."

In a family business entitlement often goes back to early sibling rivalries, parental preference, and jealous feelings. Given that these feelings might be hard, perhaps impossible, to completely eradicate from everyone's past without intensive therapy, the challenge takes a new form. First, one needs to find a way to put these feelings to rest in order to reduce their potential adverse effects without breaking-up the network. Second, an alternative, constructive energy ought to be unleashed.

The Exclusion-Inclusion Game.

Often members of the family network, sometimes spearheaded by the founder or the owner, will upset the network by including some family members and excluding others. The "exclusion game" is potentially very detrimental to the family relationships and often produces harmful results that are very difficult to mend. The challenge, perhaps the art, is to keep the family network intact. "I have excluded my younger son from the business because he is an academician, not a businessman type, you know. I will leave him money separately," told a founder of a family business. Unfortunately, as a result of this exclusion, the son and his family refuse to get together with the parents/grandparents. Any hole in the network might have a ruinous effect on the entire enterprise. The issue at stake here is managing the integrity of the network.

The Innocent Bystanders.

Family business is tied to a network of relationships. Often business discord between two or three family members sends shock waves throughout the entire network. It is not uncommon for female members of the (extended) family, who are not necessarily direct parties in the business dispute, to be the ones who call the consultant first. I remember a telephone call from the mother, the founder's wife, who said, "I am torn between my husband and my son, both of whom I love dearly. They don't speak to each other. Each tries to make me support his side and I am in the middle and do not know what to do. It can't go on like this any longer!" Calls such as the following are not unusual: "Now, the grandchildren are not allowed to visit their grandpa (the founder of the business) and we can't get together with my sister-in-law and her family. The entire family is falling apart." Or "My husband allows the children to visit grandpa although the two are not on speaking terms, but the children feel awkward because they know father is not talking to grandpa. It's a painful mess." Managing the network is an essential task in family business.

3. Managing the passion for independence and control. At S.C. Johnson & Company, father Samuel Curtis Johnson is aware of the need to give his three children control of the business (the fourth child, Winnie Johnson-Marquart, the younger sister, wasn't interested in running a business). To do so, he carved the $5 billion into three unequal parts giving each interested child a separate company to run. "We think about what are the things that destroy family enterprise," he was reported saying in a New York Times article (August 22, 1999). He understood that giving his children autonomy is the recipe for a successful transfer of power.

Indeed, one of the most common sources of difficulty observed in troubled family businesses is the owner's penchant for control. It is seen by all subordinates as a major underlying contributor for the frictions and conflicts evident in operating the family business smoothly. Such control is manifested either through the use of money or in the structure of the reporting hierarchy. The use of money takes the form of (a) the size of salaries, bonuses, and benefits, (b) the percentage of the ownership, especially in holding the majority of the voting stock or (c) both. The use of the reporting hierarchy may be expressed through (a) the structure of the official reporting channels, i.e., who is reporting to whom, or (b) the unofficial channels otherwise known as the "subterranean" reporting system where employees, especially those with old loyalties, impart information in violation of the official reporting hierarchy. The following will describe three emotional roots of the passion for control and power, namely, the importance of independence, loyalty, and the self-imposed protective stance.

Independence.

There is a direct relation between independence and the quest for being in control, a personality characteristic shared by all founders of family businesses. "My son, the President and CEO, wants me to do things his way and keep out of the way. It's my company! And I will talk to whomever I wish whenever I want. What he asks me to do, is very humiliating, you know." told an irate founder. The history of the founding of the family businesses tells it all. Typically, a business starts because of the entrepreneurial acumen of the founder and his/her disdain of corporate structure. Many began their working career in public corporations and quit upon realizing that they could do better if left completely in charge. Some were fired from their jobs and, out of feelings of anger and revenge, decided to "show them" that they could do better on their own.

Finding ways for maintaining the founder's feeling of independence is a difficult task that must be tackled. It is wise, sometimes imperative, to devise ways to steer such feelings into creative, non-intrusive, avenues rather than fight it or attempt to eliminate it.

Loyalty.

To satisfy their penchant for power, founders demand (and expect) loyalty from all those who are participating members in the family enterprise. It is an age-old known way for retaining power and maintaining stability amicably. So, loyalty becomes a moral value and serves as an emotional trigger for diffusing, opposition, resistance, and a possible revolt. It has been used as a mechanism of control and stability.

Self-Imposed Protective Stance.

Owners and founders of family business see their role in the family as the protectors. They believe that it is their responsibility to serve in this capacity and assume this role naturally and unilaterally. In support of assuming this role they provide family members financial stability by giving them good jobs in the business. In time, the role of the 'family protector' tends to extend beyond the financial arena to other aspects of behavior. A typical one is "protecting" the family from aggravation by withholding certain information from family under the reasoning of "saving them from worries." As one owner told me "I only tell my wife, and the other members of the family, what's going on in the business on a 'need-to-know' basis. Why should I bother them with my problems? After all it is I who will have to solve them."

In the beginning, as one starts a family business, its scope is fairly narrow with only a handful of key players. Many years later, all this has changed. The sizes of both the business and of the family grow. With more relationships to manage it becomes increasingly difficult to run the enterprise as if business decisions do not affect the interpersonal relationships among family (and vice versa). If the paramount goal is to keep the business without sacrificing the integrity of the family and the relationships amongst its members, then it would be wise to seek the services of those whose expertise fits such a goal.

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