THERE is a saying, a family is strongest when united. But why is it that all too often a family owning business is often grievously complicated by friction arising from rivalries involving a father and his son, siblings against siblings, or other family members like uncles, cousins and in-laws that hold positions in the business? Unless business leaders confront this predictable and damaging event and do something fast, the business will suffer and may even die. Harvard Business Review writer Harry Levinson clearly explains, “It is obvious common sense that when managerial decisions are influenced by feelings about and responsibilities toward relatives in the business, when nepotism exerts a negative influence, and when a company is run more to honor a family tradition than for its own needs and purposes, there is likely to be trouble.”
Studies indicate that approximately 70 percent of all family firms are either sold or liquidated after the death or retirement of their founders (Beckhard and Dyer, 1983). The founder’s unexpected death can force a major upheaval in the pattern of authority and ownership distribution. In this situation, conflict among the founder’s heirs often becomes so intense that they are unable to make the strategic decisions needed to ensure the future of the firm. Failure to plan for succession also threatens the family’s financial well-being by leaving many thorny estate issues unanswered and a distressed sale of the firm ends up as the only acceptable recourse. Of course, there are still a slew of options available. The surviving family members may opt to split the business, or one can buy the other out or they can sell the business or they can watch its value evaporate. All these options without exception will result in the impairment and the desecration of the founder’s legacy.
So the question begs to be answered. Why do most founders refuse to give up control or even share power with their offspring? Ambivalence is one of the major causes of a failed succession. Founders commit a huge blunder when they postpone naming a successor until just before they are ready to step down or when death comes knocking. In most cases, they avoid naming successors because they don’t want to hurt family members who are not chosen to succeed them. They also adopt different ways of coping with their ambivalence. But one thing is clear, according to Levinson, “For the founder the business is an instrument and an extension of himself. So he has great difficulty giving up his baby, his mistress, his extension of himself, his source of social power, or whatever else the business may mean to him. Characteristically, he has great difficulty delegating authority and he also refuses to retire despite repeated promises to do so.
This behavior has certain implications for father-son/offspring relationships. And Levinson hastens to add: “While he consciously wishes to pass his business on to his son and also wants him to attain his place in the sun, unconsciously the father feels that to yield the business would be to lose a big part of his ego, his masculinity. At the same time, and also unconsciously, he needs to continue to demonstrate his own competence. That is, he must constantly reassure himself that he alone is competent to make “his” organization succeed. Unconsciously the father does not want his son to win, take away his combination baby and mistress, and displace him from his summit position. These conflicting emotions cause the father to behave inexplicably in a contradictory manner, leading those close to him to think that while on the one hand he wants the business to succeed, on the other hand he is determined to make it fail.”
A poor choice of leader, a flawed succession development and leadership model, lack of visible support from the family and the failure to reinforce the board with competent directors can also cause the business to free fall but that is a different matter altogether.