[Business Issues] Why so many family businesses cause heartache

Features - Business Strategy

The perils of running a family business and how you can avoid them.

May 28, 2013
Lloyd Merritt Smigel

After 35 years of working with family businesses within this industry, plus five years working with my father, plus five years working with my father-in-law, I have become somewhat of a family business expert. It evolved as sort of a historical accident.

What has helped me significantly is that when I work with family businesses the first thing I tell the owner(s) is that I do not represent any individual in the company, but rather I represent the company; in other words, the continuation of the company so that the employees have more security. In most cases, this also means maintaining the company in the family and/or with the employees running the company. Usually, I do not advise a company to sell to another company, but sometimes that might be the recommendation.

Family businesses are tough. You work all day and come home and often continue to talk business with family — sometimes happily and sometimes with arguments. Add to that, the “special treatment” that family members get — and trying to separate family from business — it’s a tough road to travel.

Here are some of the causes of family business heartache I’ve observed:

1. Special treatment of the good kind. This is when a relative comes into a company and has to learn “from the ground up” and gets a brand new truck. They also earn more than the supervisor and get six to eight weeks of vacation the first year. He or she can have the smallest route with the most callbacks but “it’s OK,” of course. Jealousy, resentment, envy and discontent of other employees become a by-product of this treatment.

2. Special treatment of the bad kind.
This is when the relative comes in and is treated like dirt. They have to “prove themselves” by walking on fire and putting in longer hours for less pay. They also are expected to work harder than any two employees and are treated worse than the pet dog. Usually this ends in disaster within the family.

3. High and/or low pay. Pay should be commensurate with the job. The more responsibility an employee has and the more positive results he or she produces, the greater the paycheck. Some families pay extremely low wages for years and years, which ticks off the working relatives. This is a wrong rite of passage.

4. Benefits.
Usually there are more benefits to relatives. Why? Because it’s the owners’ money and they can do what they want with it. Fair? Again, it’s the owners’ money. I get it.

5. Getting away with murder/DUIs. If a relative does something wrong, in my opinion, the penalty should be the same as it is for everyone else. This is the biggest morale problem caused by working relatives. Fair is fair. Offenses such as coming in late every day, missing meetings, getting a DUI, multiple cancellations, disrespecting others, etc., should have the same consequences for all employees — relative or not. And, if one relative gets away with it while another does not, then you have problems all around.

6. Favoritism.
Relatives usually get favored treatment. Most employees “get it.” However, most relatives working in a family business don’t get it. That’s why there should be a separate family council, mission statement or review board to establish the family business “norms.” What is allowable or unacceptable and what are the consequences.

7. Playing one relative against another. I have often encountered this situation and it is a dangerous game for a family member to play. Personally, I represent a company and this game must stop as it hurts the company as well as the family structure. Family is family and business is business.

8. Oh, poor me. “Nobody knows the trouble I’ve seen…” This is when the relatives start to whine about how tough he or she has it, while they complain that the company won’t pay for the gas in their Mercedes. It’s sad that they don’t see how it really looks and how it affects other hard-working employees. I’ve also seen it when the relative complains about having to do what everyone else has to do. That’s a morale breaker.

9. Do I really want this business? This is a hard one for most employees to endure. The relative tells other employees or relatives that he or she is not sure if they really want to own the business. This is when hard decisions should be made. You can’t live in a fog. Make a commitment one way or another and stop whining. Decide to commit or not to commit, and stop upsetting the company and its employees, as well as the family.

10. What else can he or she do? Sometimes it is necessary to move the relative into a position that is different from what you had originally had in mind. There is nothing wrong with that as long as it is beneficial to the company. It could be a win-win situation for all involved.

11. Don’t want to hurt feelings. This is why an outsider might be the best bet for you. This is a business and when you factor in family problems, it is often best to get an outsider involved who looks at the situation objectively. You don’t have to hire me. There are plenty of less competent people out there... (Thanks folks, I’ll be here all week.)

12. I’ll get to all this some day. This is the worst. The longer you wait to do something about family problems in the business, the worse it gets. Structure and rules should be established before a friend or family member is brought into the company. Rarely does that happen. The longer you wait, the more difficult it becomes to establish new norms.

In Review. The size of your business does not matter. Running a family business is harder than most think. Coming home and fighting with relatives over friends and family in the business is tough. One day you wake up thinking, “How did I get into this mess?” or “Perhaps I should just sell this and get away from all of this family stuff,” or “I’ll let them work it out after I die.” I get it. It’s hard.

Employees are usually very happy to see a competent friend or relative join the business. It gives them job security and that’s what I want to see so that everyone wins. Teaching and training the next generation is crucial to the survival of both your retirement and the continuation of the business.

If the owner is the problem, then the situation must be addressed privately and professionally with potential solutions to correct the problem so that the company can be passed on successfully. The truth? Can you handle the truth? For the betterment of family and the company, avoiding the changes you have to make only prolongs the problems.

The entire process can take a few years and will have many twists and turns, but one way or another the final objective must be to keep the company intact for everyone’s benefit. Don’t destroy it for the benefit of those friends and relatives that don’t really care. Show them the light or show them the door. Hard choices, but fair to all. What comes around goes around. Stop living with the heartaches and move on with your lives.


The author is a pest control industry consultant with more than 30 years of experience. His website is www.lloydsmigel.com and he can be contacted at lsmigel@giemedia.com.