You have a client like this.
She runs a business and her hope is to transition it to the next generation. She may be one of the few who took over the family business, succeeded in her generation, and doesn’t want to repeat the mistakes of the first transition. She may be a founder who recognizes that the upcoming transition is likely to be messy and doesn’t know what to do about it. Her family doesn’t want to discuss it. When the topic does come up, there is a lot of tension that represents different perspectives and some strong emotions.
Your client is not alone.
The challenges of business succession are well-known. Over 70% of businesses fail to survive the first generational transition, 90% have disappeared in the second and 98% are gone by the third. This means that only 2% of family business survive for 100 years.
The results of this failure are often measured in missed economic opportunity for family members, failures of legacy and lineage and fractured families. What could have been a vibrant hub of economic prosperity for the family, other stakeholder groups and the community is lost forever.
The Causes of Business Failure
What causes these failures is fairly well understood. On the technical side there is often a failure to plan. Business owners need solid estate plans, governance documents, and transition plans. However, the vast bulk of family businesses fail because the family cannot make them work. What kills off more businesses than technical failures of planning are human failures of communication and trust, preparation and alignment. Families fracture and businesses fail.
The disagreements that create these fault lines are actually quite predictable. They usually involve, singly or in combination, the following five questions:
- Who will control the business and how will power be distributed within the business and between the business and the family?
- Who gets to work in the business and how is family employment done fairly and effectively?
- How do we communicate about the business in ways that create engagement and sufficient transparency?
- What are the values that should drive our business decisions and how do we reconcile different value systems, personalities, worldviews, and communication styles?
- Last, but certainly not least, how will money be reinvested, divided and distributed?
These “hot button” issues tend to trigger people. They have strong feelings about these matters and these strong feelings lead to conflict. Many families maintain a code of silence and don’t address these issues because they recognize the volatility of raising these questions. When they do arise, they often lead to conflict, the exit of family members, the formation of opposing factions or a kind of murky “stuckness” that is difficult to resolve. At the far end of the spectrum, people file lawsuits. Short of that, the business performance degrades and the family cannot thrive.
The Solution
Many family businesses attempt to adopt best practices. They create governing documents and structures for both the family and the business that are coordinated. They also work on understanding and adopting role differentiation and boundaries. These are invaluable, but if the family does not have the underlying skills to make these “best practices” actually work on the ground, they are for naught.
One way to approach the development of these skill sets is through regular family gatherings designed to address the tension of these hot button issues but to do so in ways that will lead to creative solutions and productive agreements.
We are at a point in our knowledge of human behavior and group dynamics where we can design processes that allow people who disagree, sometimes violently, to meet, engage in honest dialog and come to agreements that work. These techniques are proven and understood and in the hands of a skilled facilitator can unlock potential, decrease conflict, create momentum and generate productivity.
How it is done
No one solution or approach will fit every family. While the types of issues may be common, the manifestation in any particular family dynamic is unique. This means that every family gathering must be carefully designed to meet the needs of that family in that moment in its history together.
The first key to creating a successful family gathering is to conduct extensive interviews that uncover family dynamics, core concerns, areas of agreement and disagreement, roles and identities in the family and so on. This phase may also require in depth written assessments on such things as communication styles or values. It is essential that the facilitator gain the trust of the family members and comes to be seen as an honest broker for the family as a whole.
Once this phase is over, there comes a period of sifting through this information to determine what levels of stress the family can tolerate, what family patterns are likely to show up in the gathering, what the learning styles of the various participants are and a host of other concerns. It takes hours of evaluating, prototyping and thinking through scenarios based on years of facilitative experience to do this work well.
This leads to the design of the meeting. The meeting itself must deal with real and core issues about which the family is feeling tension or concern. It cannot dodge these questions by structuring an agenda based on communicating information or attempting to have a purely rational discussion. At the same time, it must be structured to normalize the tension by using it constructively. The primary goal of any family gathering must be to do no harm.
The design must be adapted to the family as a system, address the needs of individuals and use the right tools from the facilitative toolkit to create forward movement. This almost always involves taking a creative approach to addressing old problems. By jarring the family out of the traditional ways it has discussed these issues, they find new ways to talk about the things that matter most to them. This unbalancing must be fun and engaging, spark curiosity, diffuse but harness tension, and appear fair and open minded to all. What that will look like in any family gathering will be unique.
Through facilitated conversation, appreciative inquiry, ritual, storytelling, voice dialog or a host of other techniques chosen for that particular family gathering, the family begins to come to a new understanding of their common ground and the individual needs of the family members. From these new perspectives, agreements can be forged. These agreements don’t require that everyone like each other or even personally get along – only that, as adults, they hold themselves and one another accountable to agreements that will allow the family and the business to go forward with greater clarity, collaboration, coherence and commitment.
The surprising thing is that once these agreements are in place, families often gain new confidence in themselves and in each other and family bonds that were once strained are more relaxed. This does not happen overnight, but I repeatedly hear from clients that relationships that were thought to be broken beyond repair are mending.
Beyond that, the business starts to thrive because of the clarity of the family and the agreements they have made. These kinds of agreements become powerful tools for creating alignment and working though the tensions created by thee hot-button issues faced by family businesses.
— January 28, 2013