Family businesses have a number of inherent strengths. Family members usually have a commitment to each other and to the success of their business and are willing to personally sacrifice for it. Because they come from the same family, they often understand each other in ways that unrelated coworkers do not. Not every family business operates smoothly or well, however. Often that is because the family members are not in alignment with each other. What is family alignment, and why is it important?
What Is Family Alignment?
Alignment is a position of agreement or harmony. In a family business setting, family alignment means that all family members involved either directly or indirectly in the family business are in agreement with each other about all the major aspects of running the company. Every family member doesn’t have to think alike or agree about every decision, but the family businesses that succeed are the ones that are able to create unity of purpose and values and are able to maintain those even as the business grows and changes over time
Family businesses are incredibly complex, and the longer they continue to grow across generations, the more complex they become. In addition to all the normal business complexities, the relationships between family members are multifaceted. These are people who have interacted with their family members inside and outside of the company over a lifetime. They likely have some baggage. Few families are entirely free of issues stemming from power struggles, competition, jealousy, resentment, or emotional trauma or drama from their upbringing.
Alignment and Transition Planning
Family alignment is crucial to establish for transition planning. Unfortunately, if family members cannot agree on important issues, when a crisis or a leadership transition occurs in the company and the company cannot weather it, there will be consequences for the family relationships too. In many cases, when a family business goes bankrupt, family members have so much animosity towards each other that they stop speaking to each other at all. Some companies have gone bankrupt because they cannot resolve family conflicts due to underlying anger or bitterness. It’s a double loss – financial and personal.
The reason that many family businesses are motivated to bring in an outside consultant is because they have problems they find difficult to solve within the confines of the established family rules and order. These may include arguments, disagreements over leadership or compensation, or competition between family members. Communication has broken down. A successful business transition seems unlikely because they cannot resolve even day-to-day issues.
Family businesses may believe that they want to fix specific problems about the company’s profitability or growth, transition an ineffective leader out, or find a way to handle family members who do not want to be an active part of the company any longer. What they really need is to create family alignment.
Alignment happens when family members can agree about the family’s vision and values and make collective decisions about leadership and governance in a smooth and non-contentious way. It allows family members to cooperate and enjoy each other again. It opens up paths for investment in future generations. It lets all family members to talk about their own needs and how they correlate with what is good for the business. And tough conversations about topics like leadership transitions and compensation become possible.
A very large percentage of family businesses do not survive transitions. Creating family alignment can be very challenging. Power dynamics do not develop and solidify overnight, and people in leadership positions are often masters at keeping control and do not want to relinquish it. It can be emotionally wrenching for other family members to try to change these dynamics to maintain or improve the company. And when they do, it takes time to accomplish – months and often years.
When companies do commit to doing the work involved in creating family alignment, though, they find that they can see some progress right away. Learning to communicate better will produce immediate results for problem solving and decision making. In transition planning we always advise starting sooner rather than later because it takes time to make these kinds of changes and often involves defining family roles and responsibilities and training younger family members for leadership. Creating family alignment can make an enormous difference for the company at that point in time and during the transition planning process later.
If you feel your family could benefit from better alignment, please call us at Prometis Partners. Helping families understand each other more fully is our mission. We love to see businesses grow stronger and thrive into the next generation.