Let's Take the Family Out of the Business
The rules of business systems and families are
different and incompatible - let's quit pretending otherwise!

By: Bruce Hodes

In business, it is common for companies to aspire to be family-like. In fact, there is a long history of business cultures trying to be like a family.

However, as organizations, businesses and families have very different functions. Serious problems can arise when people confuse the two.

In my life and in my business career, I have been a part of very potent and powerful family and business organizations. I have also been a part of dysfunctional family and business systems.  In both cases, it is obvious that whether functional or dysfunctional, powerful or terrible, both systems are very different.

The incompatibility between these systems often shows up in family-owned companies, especially as they pass on to the second generation. Why?  Because the rules that govern successful business organizations are radically different from the rules that govern successful family life.  The intermingling of these different sets of rules can have drastic and terrible effects.  It is like playing baseball while using the rules of football, or soccer with the rules of hockey.  No matter how hard you try, it won't work.

Choice vs. No Choice

How are the two systems different?

Family life is about a relationship between adults -- nurturing, loving and supportive -- possibly creating and raising children. The children grow up and then begin creating families of their own.  Family life can also include helping adult children and their families and/or supporting and nurturing parents into their golden years and eventual deaths.

Business life involves a group of adults working together and providing a service or product, purchased by customers. The customers pay money, which funds the production of the service and/or product.  Through work, adults get to participate with others in a game of accomplishment.  They also generate for themselves a stream of revenue from which they can conduct their lives.  Clearly, family and business serve two very functions.

A major difference between the two systems is that people have no choice about which family they are born into. This results from being a part of a very particular egg and sperm club.  Our entire lives are spent dealing with this particular club and the circumstances that we find ourselves born into.  In contrast, business is a choice.  You choose where to work and what you do.  Others choose not to work.  (Some would argue that people must work in order to make money and survive, and thus have no choice.  However, for the purposes of this article, let's assume that people do have a choice and leave that debate for another time.)

In the business world, you can pick where you interview for work and put yourself in a position of being selected for employment. You can also quit work when you choose.  However, there is no "getting out of" family.  Even if you become estranged and detached, your parents, brothers and sisters are yours for life.  On a certain level, you can never escape from your family.

In healthy families, you would never fire your relatives. You deal with and have your children, parents and siblings in good times and bad.  Because it is designed for economic survival and for customer satisfaction, work needs to have different standards.  Problems arise when family businesses get the two confused.

Healthy Family Businesses

In dysfunctional family companies, the position of the family members somehow becomes a right and an inheritance. Working at the company becomes some kind of legacy simply for being part of the family.  These companies may prosper for a while, but they will eventually decline and die.

In healthy family businesses:

• Family members are in the right places doing the right work, because their intelligence and abilities put them there, not because they belong to the family. More important, this is clear to the entire employee group.

• Being related to the owners gets you (at best) an interview. Your ability, hard work and circumstances, not your bloodline, dictate your career path.

• Parents and children who work together call each other by their first names. Couples work together because they are successful, not in order to strengthen their marriages.

• CEOs whose children work in the business do not use it as an opportunity to strengthen their family relationships or work through their issues. Instead, they see it simply as an opportunity to work together and accomplish goals with someone they admire and respect.

In addition, very strict parameters govern work conversations. Frequent discussions about work may be banned from the dinner table, and certainly is not pillow talk.  Outside of work, there are a lot of other topics that need to be dealt with, and members in a healthy family business are clear on this.  Family is family and business is business, with the two seen as very separate.  In dysfunctional family businesses, these distinctions blur and can take a huge toll on marriages and other family relationships. 

Keep Them Separate!

To work in a healthy family company, the expectations have to be much higher for family members. The game of business demands this kind of rigor.  When family members are singled out for special treatment and support, it can breed anger and resentment among other employees.  When employees perceive the organization as not being a meritocracy, the overall performance of the business can be negatively impacted.

On the other side, family life can sometimes be filled with pain, ugliness, and hatred. We have all seen families do horrible things to each other.  Fortunately, we have also seen families do incredible things for each other in the name of love.  Some of my most profound growth as a human being has come from "coming to grips" with my relationships with parents, my sibling and relatives.  However, business should not aspire to these polarities.  There is no need in business for internal relationships to be either so positive or so negative as occurs in family life.

The bottom line is that families and businesses are different types of systems with very different types of functions. Work can still be a nurturing and worthwhile place where people can grow and develop, but it is not family.  And families can be focused places where group accomplishment is encouraged and appreciated, but it is not work.

By keeping family out of work and work out of family, the people engaged in both systems (and the systems themselves) will be much better off.

For the past 25 years, I have worked with CEOs, business owners and senior executive teams to help them design and grow great companies. During that time, I have learned a few things about the components that make up a great company.

In “Good to Great,” Jim Collins defined a great company in the following manner:

"The good-to-great examples that made the final cut into the study attained extraordinary results; averaging cumulative stock returns 6.9 times the general market in the fifteen years following their transition points. These are remarkable numbers, made all the more remarkable when you consider the fact that they came from companies that had previously been so utterly unremarkable.”

This is a fine definition for companies which are large enough for you and me to know about and be their customers; but what about small- to mid-size companies? For this market, I would add to Collins’ definition by saying that great small to mid-size companies are also defined by love, a term I do not use lightly. 

In small to mid-size companies, the primary stakeholders love a great company. The owners love the company because of superior financial performance and because they see their firms as their life’s work. The CEOs love the company because it enables them to make a difference in the world and leave a powerful and potent legacy. The vast majority of the customers love a great company because it provides superior service. And the employees love a great company, as demonstrated by the performance of the company and employee retention.

Components of Great Companies

Now that we have defined a great middle market company, what are the components that make up greatness? I believe they can be found in the acronym G.R.E.A.T.

·        G: Generous and Growth. The dictionary defines generous as “liberal in giving or sharing; not petty or mean; magnanimous; abundant and ample”. These are apt descriptions of the culture of a great company. Great companies provide space for people to grow and develop. They accept human foibles and allow mistakes to be made. Great companies are not mean-spirited or punitive. They have rules, but only a few. They are willing to give and bend, and they come from a mindset of abundance while avoiding notions of scarcity.

Growth causes all the progress and wealth but it also causes all the problems and pain. Without growth, a company stagnates and becomes internally focused. Great companies use growth as the engine for their internal and external development

R: Revenue and Reflection. Revenues are central to any business. The difference with great companies is they generate a lot more than their competition. Revenue can also mean (although not necessarily) that they generate profit. For many growing companies, profit can be elusive during the times when revenue must be put back into infrastructure and additional resources in order to grow. In great companies, revenue is understood by everyone, not just the top executives. All employees understand how revenue is generated and consumed. More important, each individual understands how he or she can increase and impact revenue.

Reflection is the planning piece. In great companies, long-term success is supported by some sort of disciplined planning process that engages the leadership group. The leadership group regularly assesses where the company is now and what future they want to design. Leadership also provides a disciplined and focused way for problems to be solved and the pain of growth to be lessened. Early on, great companies implement a formal annual process from which to plan and design their growth. This helps establish and is part of their long-term success.

·        E: Entrepreneurial. Great companies engage in proactive and creative actions and activities. They focus on cutting costs and thinking about ways to improve efficiency. They create a culture where employees proactively make things happen rather than standing around waiting for orders. Great companies know their destiny is in the hands of their employees, and they get them actively engaged in creating a bright future.

·        A: Attitude. While “entrepreneurial” and “generous” speak to this type of attitude, great companies also exhibit plenty of spunk, vim and vigor. They have attitude with a capital A. This may mean going the extra mile for the customer. It may mean being on time, no matter what. It may mean that top executives double up in hotels to cut costs and contribute to their profit. Whatever the context, great companies exhibit an attitude and view of the world that clearly sets them apart.

·        T: Teamwork and Transformation. Great companies are not groups of individual agents with everyone doing their own thing. Instead, they are focused places where collaboration and involvement are the currency. Employees know that customers experience the company as a whole and that any negative experience from anywhere in the company can sour the relationship. It takes a whole company to make a customer wildly loyal.

Transformation means that the company touches its employees in meaningful ways. People see themselves differently as a result of their relationship with the company. Employees are better for having worked there, customers are better for having bought there, and owners are better for having generated a company that makes a difference. Great companies do more than just provide a service and generate a product. There is clearly a much bigger game that molds, impacts and transforms the lives that they touch.

How many of these components of greatness does your company possess? More important, what would your customers and employees say about your firm in relation to this standard?

For companies of all sizes, greatness is difficult to obtain. And once there, it is easy to lose the distinction of “great”. However, the journey to greatness is more important than the destination. In my experience, aspiring to being a great company is where the true value lies.

5.   Teams develop in stages. It is good for participants to be aware of these stages because they normalize the experience of growing and developing into a high performance team.

The stages are as follows:

Stage B - This is when reality sets in about how group life can be demanding and hard work. It is no longer fun and there is finger pointing between employees. Mutual accountability by most is seen as an empty concept and team members look at who to blame. This is where most teams die and where there is the need for the most support and focus. Commitment needs to be generated to work through the issues. This is also where the employee’s love of the game is needed and counted. For most groups Stage B is where the real work counts and is necessary.

Stage D - This is the high performance stage, where the team is really using its group structure to produce some remarkable results.

I hope the above insights are valuable to you and your workgroups. They have been valuable to me as I seek to establish a high performance team in my office.

I invite you to share your experiences in building high performance teams.