Best of Times, Worst of Times

To borrow from Charles Dickens’ famous opening in A Tale of Two Cities: Family businesses can be the best of times, and family businesses can be the worst of times.

When working well, family businesses can unite families, provide meaningful employment for generations, and create a tangible expression of a family’s values.  Patient capital and utilizing the competitive advantage of family-ness can lead to outsized returns over generations.  On the other hand, family businesses gone awry can ruin financial opportunity and tear families apart. What makes the difference? What can families do to increase their likelihood of fostering the “best of times” across generations?

Good family businesses understand and address the three systems that they face: the family system, the ownership system, and the management system.  Families and family leaders that recognize and manage these three inter-connected systems have a higher likelihood of sustaining success, both as a family and as a business, over multiple generations.

These three systems are complex things, and the intersections of these interconnected systems can be daunting. For many leaders, addressing issues that impact both the business and family (for example, the need to terminate the employment of a family member) may be unsettling or uncomfortable. What is important to remember is that systems and families work because they interact in ways that are not easily quantified. Haveing the courage, as a family, to address the issues will help develop systems for sustainability.

Family businesses that survive for multiple generations need structures to help manage relationships and the inter-connectedness of the three systems. Family business leaders need to be proactive in finding ways to address the uncomfortable or difficult circumstances within all three systems. By developing healthy ways of addressing these issues, it will strengthen the potential for positive business growth. Oftentimes an outside resource can be effective in helping both the family leaders and the family in discovering ways to create positive solutions.

Figuring out what the issues are and how to address them is a challenge, but it is a healthy part of growing together. 

As a family, to start the family conversation, check out 20 Questions Practical Checklists ForBusiness Families.