Are family business owners an asset or a liability?

Freud observed that the intensity of family and work relationships is created by the conflicts between ‘lieben und arbeiten’ (love and work). He suggested that love and work are the main sources of self-esteem and pleasure in life and only when both are balanced do we achieve satisfaction. So what does this tell us on Family Businesses?

In reality, families and businesses are concerned about different goals. On one hand, families are concerned about emotions, they focus inward and generally they resist change. On the other hand businesses must take the opposite approach if they are to survive – accomplishing tasks, focusing outward on the external environment and looking for ways to exploit change.

So, family members can be either a great strength or a potential weakness for the family business. Family businesses that overemphasize the business system, and consequently diminish attention to the family system, often end up with families that do not relate to each other and psychologically end up looking at the business as the “enemy within”. In such instance, families many times end up feeling that the business is dominating all aspects of family life, which invariables means that family issues and needs end up being neglected.

On the other hand, families can also overemphasize their thinking about matters at home to the detriment of their business concerns. In this case, family considerations and needs become the first priority in business planning and decision-making. The main danger here is that a desire to make everyone happy can result in unqualified family employees entering the business, threatening effective next-generation leadership. The business that places the family first often neglects making objective performance appraisals and leadership
development plans for family members.

All this highlights the importance of developing a Family Enterprise Continuity Plan which ensures that the family interests are considered along with those of the business. There are many benefits for family businesses to engage on such a continuity plan, including that it encourages the next generation and in-laws to learn about the family’s history and values, it reinforces a sound family communication process, it supports the development of family agreements on issues such as employment or ownership before a specific decision must be made and so it clarifies expectations around such inherently difficult issues as money, careers and control.

The ultimate aim of such planning is to achieve a healthy balance between the family and the business. Such a balance creates a positive environment where the family thrives and the business performs. This balance is particularly important as family businesses grow. Such a balanced approach to addressing these two subsystems becomes the foundation for healthy family business relationships and for the creation of a family business legacy.

All this means that to make sure that the family ownership of the business is maintained, by achieving a good balance between the present and future needs of the business and the family, it all boils down to the ability to plan objectively the family’s and the business’s shared future. Many family business people resist family business planning and even fail to develop a systematic framework for thinking about the future
strategy of their families and businesses, to their great peril.

The above article is just a small taste of the various topics that will be presented during the upcoming Webinar that will deal with the various challenges and issues that face Family Businesses, on the 19th July.  To register your attendance please click HERE. In this webinar, I will also be showing how a family business can avail itself of €15,000 to finance the costs of succession planning, as part of a scheme offered by Malta Enterprise in conjunction with the Family Business office. This Webinar is being organised in conjunction with the Malta Institute of Accountants and is therefore also eligible for CPE Hours.

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