Why do so many partnerships & family businesses struggle?

Why do so many partnerships & family businesses struggle?

Why do so many partnerships & family businesses struggle?

Business partnerships can be a lot like marriage: some work and some don’t, and when it works, it benefits everyone. However, when it goes sour, it can be a mess. Donald Cooper breaks down what goes wrong and how to avoid it.

When business partnerships work, it’s magical. Partners complement each other, support each other and cover off for each other. That’s not “compliment” each other as in, “That’s a lovely jacket you’re wearing today, Bob,” but rather they “complement” each other in that their diverse skills, experience, and personalities work well together to create a stronger, more successful business.

But when partnerships don’t work, it’s a nightmare. Much of my coaching work is in figuring out what’s not working in dysfunctional partnerships and how to fix it.

So, here’s what I’ve discovered. For any partnership or family business to work there are five key elements that must be aligned. They are:

  1. A shared vision for the future of the business.
  2. Shared values for the business, and for their lives.
  3. A shared commitment to the business.
  4. Competence in some aspect of the management of the business and confidence in each other’s competence.
  5. Rapport with each other’s personality.

There’s a sixth key factor that can, and often does, destroy a partnership or family business. That’s when, in spite of the competence and commitment of the younger generation, the older generation simply won’t give up control because they have nothing else to do with their lives. The business is their “neat fort” where they feel safe, comfortable and in control—and they won’t let go.

When a partnership or family business is falling apart it’s almost always because some of these key factors. There’s constant turmoil, employees are forced to take sides, or take “I don’t give a damn” pills. The best people often leave, and it’s a mess.

 

“In a world where we need to be extraordinary, focused, and clear in our market positioning and operational decision making, compromise can be deadly.”

 

When partners can’t agree, one of these three scenarios usually develop:

Scenario #1: Because the partners can’t agree on what should be done or how to move the business forward, they do nothing. The business struggles, loses momentum and grinds to a halt. The staff become disengaged and, eventually, it all ends badly.

Scenario #2: Because the partners can’t agree on what to do, they compromise and go with a grey, boring, watered-down course of action. In a world where we need to be extraordinary, focused, and clear in our market positioning and operational decision making, compromise can be deadly.

Going back to my days as a fashion retailer, let’s say that as a company we decided to put chairs throughout the store for husbands and boyfriends, who would rather relax than shop in a ladies clothing store. And let’s say that I wanted to be amazing by buying eight electric reclining massage chairs, but my business partner protested, “Chairs are a fine idea, but over my dead body will we spend the money on fancy massage chairs.” So, we compromise and bring a couple of old bean bag chairs from home and stick them in the corner. There goes “amazing,” right out the window. Yes, compromise can be deadly.

Scenario #3: The third scenario is what I call, “the alternating turns plan.” Here’s how this one works. Because we can’t agree on what to do, we each take turns getting our way. “We did it your way last time, so now it’s my turn.” It isn’t about what’s right, spectacular, or best for the business, it’s about whose turn it is to get their way.

And, the universe being as perverse as it is, we’ll likely end up being wrong most of the time—but it doesn’t matter, “It’s my turn.”

You know I’m right about this, probably because you’ve seen it or lived it in business many times. If partners can’t work well together and are constantly falling into one of these three deadly scenarios, they need to face reality and deal with it by arranging the most civilized divorce possible and go their separate ways.

Bonus Tip: By the way, the exact same dynamic happens with couples and families. If they can’t agree on where to live, what furniture to buy, what color to paint the walls, or how to raise the kids, they either do nothing, they compromise on some boring, watered-down solution, or they go on the “It’s my turn to get my way” plan.

The good, the bad, and the ugly of family businesses:

I believe that a well-run family business is generally a better business than a well-run non-family business because it has a family culture, a family ethic, it treats people better, and because it thinks generationally rather than quarterly, it makes better, more holistic, long-term decisions.

However, a badly run family business is generally a much bigger zoo than a badly run non-family business because there’s that whole other layer of complexity, emotion, politics, and intrigue that doesn’t exist in a non-family biz.

These are the businesses that also have big challenges in attracting and keeping top-quality outside managers. Good outside managers won’t stay if incompetent family members are allowed to stay, or if the drama and politics are overwhelming.

Then, as the gene pool turns into a cesspool, it ends badly. If you have a dysfunctional family, you have a dysfunctional family business. One of the first questions I ask when coaching a family business is this, “Would every family member who works here have the job, the title, and the salary they have now, if they weren’t related to the owner?” The answer is almost never, “Yes, they would.”

In all my years of coaching family businesses, there seem to be about five reasons to have a family business. These reasons run from good to downright sinister. They are as follows:

  • It’s the best way to preserve and grow the family’s capital.
  • It’s a natural extension of our desire to mentor and encourage the next generation.
  • The business is a vehicle to employ unemployable family members to whom we have, for some mysterious reason, a misguided sense of loyalty.
  • It’s an effective way to control everyone in the family.
  • It’s a way to create a legacy, or to satisfy a longing for immortality.
  • Another problem that I see all too often is that children resent the family business because, growing up, they constantly competed with it for their parent(s) time and attention and always lost. Now, as adults, they’re expected to go into that business and “sleep with the enemy” and they hate it.

If your kids grow up resenting the business, how can they then embrace working in it, and with you?  This one has “failure” written all over it. I’ve seen examples of the next generation sabotaging the family business just to get even.

So, if you’re involved in a partnership or family business, how will you use these insights to fix what needs fixing and to continue the good stuff that makes you special?

 

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