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How to manage a Family Business crisis

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The ability of family members to manage conflict effectively is the most critical success factor for family business, especially since the potential for conflict is woven into the very fabric of a family-owned and operated entity. At times, family business conflict can be extreme and seem intractable. This conflict may be active, damaging family relationships, compromising their business, and threatening their shared wealth, or it may be passive, with stakeholders stuck and unable to make important decisions in a timely manner, even from the very fear of conflict. Family members often react by creating siloed organizations and avoiding the important conversations necessary for good planning. When families go to war over business, wealth or power, or when family issues overwhelm sound economic decision-making, everyone loses.

 

They start with the father

The difficulties of the family business begin with the founder. Usually he is an entrepreneur for whom the business has at least three important meanings:

a) The entrepreneur characteristically has unresolved conflicts with his father, research evidence indicates. He is therefore uncomfortable when being supervised, and starts his own business both to outdo his father and to escape the authority and rivalry of more powerful figures.

b) An entrepreneur’s business is simultaneously his “baby” and his “mistress.” Those who work with him and for him are characteristically his instruments in the process of shaping the organization.

If any among them aspires to be other than a device for the founder—that is, if he wants to acquire power himself—he is soon likely to find himself on the outside looking in. This is the reason why so many organizations decline when their founders age or die.

c) For the entrepreneur, the business is essentially an extension of himself, a medium for his personal gratification and achievement above all. And if he is concerned about what happens to his business after he passes on, that concern usually takes the form of thinking of the kind of monument he will leave behind.

The fundamental psychological conflict in family businesses is rivalry, compounded by feelings of guilt, when more than one family member is involved. The rivalry may be felt by the founder – even though no relatives are in the business – when he unconsciously senses (justifiably or not) that subordinates are threatening to remove him from his center of power.

 

How to manage a crisis?

A good crisis management response requires not only thorough scenario planning and development of the supporting business structures, but attention to the unique human dynamics of the family, which often become more pronounced in crisis situations.

More than at any other time, this crisis demands confident leadership and a focus on the competitive advantages created by family ownership and control. The following ideas should help to identify opportunities for improving a family business leadership and to manage a crisis:

 

1. Take the tough decisions

“Management’s decisiveness is a critical success factor in any organisation’s ability to deal with threats and give the employees a sense of purpose and safety”

2. Manage risk and contingencies

“Managing risk requires increased attention to financial planning so your firm can continue to exploit its opportunities and strengthen its competitive position”

3. Share information and communicate

“Communication during a crisis serves two valuable purposes, first to inform and second to motivate”

4. Practice effective family and business governance

“Businesses need stronger governance processes that focus on leadership, accountability and performance”

5. Demonstrate values and stewardship

“It is easy to justify cutting charitable activities in the current environment but unfortunately this is when the needs of the communities we serve are at their greatest”

6. Encourage entrepreneurial behaviours in the next generation

“A capable and committed next generation is the most important legacy a business family can have”

7. Exploit family business culture

“Families are driven by values that reflect their shared beliefs, experiences and psychologies”

8. Be authentic leaders

“There are no formulas for authentic leadership because leadership is situational, based on the interaction of the leader’s style, experiences and personality with the challenges his or her organisation faces. It is a personal activity that requires the leader to recognise how their values and behaviours can influence their followers to move beyond achieving business goals to building a more effective organisation”

 

Notes

HOW TO LEAD YOUR FAMILY BUSINESS OUT OF THE CRISIS

http://www.campdenfb.com/article/how-lead-your-family-business-out-crisis

To prosper in a crisis, adopt the strategy of large family businesses

http://www.hec.edu/Knowledge/Strategy-Management/Innovation-Entrepreneurship/To-prosper-in-a-crisis-adopt-the-strategy-of-large-family-businesses

Conflicts That Plague Family Businesses

https://hbr.org/1971/03/conflicts-that-plague-family-businesses

The five attributes of enduring family businesses

https://www.mckinsey.com/business-functions/organization/our-insights/the-five-attributes-of-enduring-family-businesses

 

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