As much as objective, rational-thinking business advisors caution against mixing business and family, the fact is that – by their very nature – the family and business aspects of a family business are inextricably linked. Sometimes, when issues and conflicts arise – like those surrounding the transfer of leadership of a family business from one generation to the next – searching for their cause and remedy within the business simply isn’t helpful.
So why can passing on a family business be so difficult? As explains French psychiatrist, business consultant and author Jacques-Antoine Malarewicz, transferring a company to the Next Generation isn’t just an issue of managerial logic – or that particular mental model (comprising biases, assumptions and beliefs) from which a manager(s) operates or approaches problem-solving.
Actually, says Malarewicz, it’s a meeting of managerial logic with family and/or patrimonial logic. If these mental models aren’t congruent, conflict arises – since there’s no dominant (agreed upon) logic for approaching scenarios and resolving challenges. Throw in the issues of money and the transfer of capital (which is what the family business, in effect, represents during this time) – and handing over the baton can very quickly turn emotional and heated.
When emotions bubble over, says Malarewicz, past issues – even those which have been buried for decades, like scandalous family secrets such as illegitimate children or nepotism – can resurface. This hampers effective decision-making in the family business in general and surrounding the transfer of power itself.
If not carefully managed, this bad blood can actually destroy the business – in fact, as Malarewicz points out, faulty family dynamics is why ownership of two out of three family businesses no longer rests with the family itself. Another reason why passing on a family business can prove difficult to negotiate, says Malarewicz is when the current head of the business is unable to relinquish control (even if of an advanced age).
Malarewicz also highlights how the so-called generation gap is impacting on family business succession in his native France (some of these trends can be noted in other countries, too). In particular:
Malarewicz offers the following advice to family businesses in the midst of succession planning, or that are dealing with conflict arising from such a succession: