The Dark Sides of Family Businesses

By Prof. Enrique Soriano

What are the unhealthy indicators that make families dysfunctional? For business owners, we are all aware that many of the attributes and characteristics common to family businesses are similar to that of ordinary non-family companies. We can start with cash flow, control, and succession issues, among other issues, all of which are common internal management concerns that even highly structured organizations are not spared from. Second, all businesses have, at some point, suffered some degree of confusion brought about by unclear roles and outdated plans and programs that no longer meet the demands of an ever-evolving set of external and complex challenges.

In short, for a business to succeed, it must have a strategic mindset, demonstrate flexibility, and follow a clear set of shared vision and purpose. So what is really the difference between family and non-family enterprises? Family-owned businesses must carefully consider the deep interplay of the family, the characters within the family circle (active and inactive), the individual and the family goals, and collectively their intense attachment within the operations of a successful business. By its very nature, the family and business systems are so conjoined that when left on their own to feed, they can lead to frayed nerves, emotional conflict, and inevitably schism. Every family business is unique and it is very important that family business consultants tread carefully and look at each family differently.

The Two Evils: Emotion-based Sibling Rivalry and Entitled Children

The first evil is what Dean Fowler described as emotion-based sibling rivalry. He adds, “It is the struggle to gain attention and love from parents that was missing during childhood. The adult child’s actions and behaviors are directed toward gaining approval and recognition from his or her parents. This need may continue psychologically even after the death of the parent.”

Fowler continues, “Rather than having a strong foundation for their own self-esteem, these adult children continue their emotional craving for and dependence upon their parents’ approval. Because emotion-driven sibling rivalry is rooted in problems of self-esteem, the primary solution must be built on methods that encourage the adult development and individual maturity of each of the siblings.” Fowler concludes his research by highlighting a valid point, “One must recognize that the primary problem is not, in fact, between the siblings, but rather between each child and their need for recognition from his or her parents. The real problem lies between the parent and child, not between the siblings. Consequently, the solution is not working with the sibling relationship, but with the relationship between the adult-child and the parent.”

The second evil is the entitlement of the next-generation family member(s). Every family-owning business struggles with entitlement. Having entitled and confused children in the family business is fraught with danger. When family members display a sense of entitlement, the business does not bode well. Worse, when they are made to join the family business and there are no rules defining their participation, entry and exit, you would typically expect these children to act like spoiled brats and bully their way by demanding power without accountability.

Consultant Rick Johnson correctly pointed out, “An attitude of entitlement that is displayed openly can create major challenges for even the most successful family business. This attitude is often displayed by the family member’s work ethic, expecting every employee to “live to work” and give of themselves unconditionally while Junior takes off every Friday afternoon or goes on extended vacations.”

He further shares, “A sense of entitlement can also lead to a family member managing in an autocratic style –feeling that they can do whatever they want in the business and yet non-family employees need to do exactly as they are told.”