This topic has been of particular interest to Malcolm during his years as a management consultant to the jewellery industry. Malcolm himself works with his wife, daughter and son, and is well aware of the positives and negatives encountered in a family business. Family conflict has been the focus of sit-com humor story-lines for many years, but the age-old problem is no laughing matter when it comes to running a family business.
American business scholar John Ward once wrote: Families tend to be emotional; businesses are objective. Families are protective of their members; businesses are less so. Families grant acceptance unconditionally; businesses grant it according to one’s contribution. It is these differences in attitudes that create conflict when a family and a business work together, and it is this conflict between family members that can be devastating to a family business. The conflict, if not addressed, will eventually cause the demise of the company. From my experience with management consultancy in the jewellery industry over the past 12 years, I estimate that 95 % of today’s jewellery businesses are family owned. Of these businesses, research has shown that only 37% survive the second generation. A figure like that makes it all too easy to blame the second generation for the problems that cause the collapse of the business. However, if we look a little deeper, the second generation is damned if it does and damned if it doesn’t. If they are successful, it is because “they were born with a silver spoon in their mouth” and the first generation made it easy for them. If the second generation is not successful, it’s because “they couldn’t live up to their old man”.
Parents (sometimes unknowingly) have a huge role to play in the business success of their children, especially if they choose to join the family company. Not many people plan and start a family business for their children. Most family companies start off small, as a means to a better income and better way of life for those who start it. This start-up phase is when the foundations of the business are laid. It is usually a time of growth without planning. Entrepreneurial skills are the driving force for founders of a business. For the first generation, the business is made successful by a combination of sacrifice, hard work, worry and maybe a little luck. The business only becomes a multi-generation concern when the second generation becomes interested or is steered (gently) into the company. It is at this time (and any other time when another generation joins the company) that the business becomes vulnerable. A new set of ideas is introduced and these can either help the company to grow or can cause a decline in business. It is at this stage that planning skills are needed. If planned and managed properly, with fairness, the joys of owning a family operated jewellery store can far outweigh the negatives.
Family members usually stick together and support each other when the going gets tough. Under similar pressures, non-family partnerships tend to break up because the going is too tough. A far greater trust exists between family members working in the same business, than exists between family members and other employees. Families trust each other to do the right thing by each other and by the business. Non family staff members are viewed as looking after their own future, which may not be in the best interest of the business or the family. Another big benefit of family businesses is the generation mixture of experience and wisdom on one hand and youthful enthusiasm and drive on the other hand. Together, this combination is hard to beat. On the negative side, a family business can stunt the personal growth of offspring. Family businesses by their nature, can only offer a narrow range of experience compared to a person who is not involved in a family business who gets a wide range of experience, either by moving between various jobs or doing the same job with various companies.
A negative for both the parents and children involved in a family business is that it can breed a dependence of children on the parents. On the other side of the coin, if the children feel obligated to be in the family business, it can financially disadvantage them (they may well make more money in the profession that they would rather be in). A disadvantage to the business is the lack of new blood, with completely new outlook. Children are generally raised to think the same way, with the same philosophies as there parents and therefore do not approach the business with a totally new outlook. A result of living and being reared in a family business environment instills a set of business values in us. As humans, we believe, we support, and practice the values we are conditioned with. This is true of life. We may from time to time challenge some methods but rarely challenge the philosophy. This includes business philosophies. It is healthy to obtain other perspective’s from other successful business people.
But, by far the main negative is the possibility that a family business can split the family apart. So why is it that conflicts occur much more often in a family business, as opposed to a non-family store? One reason is the resistance of parents to change. Parents who are successful in business, often have trouble seeing the need for change. Sometimes they are even more resistant when the suggested change comes from their children. Even if they see the benefits in the change, they have trouble implementing it. This comes from a deep-rooted, long standing conditioning that parents know best. Parents attitudes can advance or restrict the growth of the business, as well as the growth, both personally and professionally, of their children when the two generation work together. As has been said by more than one child in a family business as they mature “I have been in the family business three years now and its amazing how much more my parents know than they did three years ago.” We treat this as a joke but there is a degree of truth in that statement.
There will always be differences in opinion between family members in a business because each new generation thinks slightly differently than the last generation. For example, while growing up, children see how the family unit suffers because of the hours put in to the family business by one or both parents. How many children will not enter the family business because of this factor and how many children enter the family business but will not commit to the hours the parents have or are working, because they have seen and felt the effects of working long hours? Immediately we have a conflict of values between generations.
The answer is to put a communication and arbitration mechanism into place within the family unit to allow for quick resolution to most, if not all conflicts before they become destructive to either the business or family. Successful family businesses exploit the strengths of family relations ships, all the while managing the company according to the most sound business principles.