Family Business: Learning to Leverage Inborn Competitive Advantage
 by
Henry D. Landes
February, 2002
Family-owned businesses are an extremely important segment of
the economy in the United States. In fact, recent statistics show
that family-owned businesses account for 60 percent of all U.S.
employment, 78 percent of all new jobs, more than 50 percent of
the Gross National Product, and 65 percent of all wages paid. Yet,
amazingly, fewer than one in three family firms survive to the second
generation.
While love and respect for one another can be a source of great
strength for a family business, succeeding in family business takes
more than just love—a ot more. Family businesses face a whole
set of complexities and troubles not experienced by other businesses,
as family issues and business issues frequently get tangled together.
Dealing with family members who are also employees, making decisions
about salaries, promotions, business dealings and personnel can
cause major headaches and/or heartaches. A period of particularly
high risk for both the family and the business is during ownership
and management transitions. Everyone feels off balance as they try
on new roles, often exposing an emotional minefield. Many family-owned
businesses don't survive this period.
A Model for Success
At the Delaware Valley Family Business Center, we have developed
a model to help business families understand all the forces at work
in their organizations. In our model, the family is the center,
the fulcrum, the foundation of the business. It is the first circle
of the circle of love. While to business is important and you need
to treat it with respect, the family is foremost.
Balanced on top of the family foundation are two key elements:
the business operation and the ownership system. In contrast to
a family, which offers unconditional love, a business operation
must be performance based or it will fail. And understanding of
and experience with critical ownership structures and policies is
often very limited. So how can this delicate balance be achieved?
Balancing Act
First, business families need to talk on a regular, formal basis,
perhaps monthly or quarterly. Think of these meetings as "research
and development labs" for the family business. Second, families
need to learn. Read books, listen to tapes, attend forums that address
the unique and complex challenges of running a family-owned business.
Our center offers several of these throughout the year.
Possibly the most important step, however, is building common understandings
and commitments about the tough stuff that most business families
face, then developing written policies based on those commitments.
Families who take the time to develop written policies can avoid
many future misunderstandings, clarify expectations and build common
values and a shared dream. Policies cover everything within the
business from compensation issues to a code of conduct.
Developing a policy handbook for your family-owned business takes
considerable time and effort, but it is worth it in the long run.
While it certainly will never be easy to run a business with family
members, it can be extremely rewarding, both emotionally and financially.
When family businesses work, they possess an inborn competitive
advantage that no other company can match.
Submitted to W4 - Central Bucks Chamber, 2/7/02 (625
words)
Henry Landes is founder and president of the Delaware Valley
Family Business Center, located in Sellersville, PA, which has served
over 400 family-owned firms since 1988 with consulting services,
Forums and other "learning labs." A contributing editor
of Family Business magazine, Landes and his clients are
often featured in this leading international publication. The center
will hold a forum for family businesses on March 14, "Beyond
Shouting, Sarcasm & Silence: Transforming Your Work & Family
Relationships—One Conversation at a Time." For more information,
call the Delaware Valley Family Business Center at 215-723-8413
or 800-296-8672.
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