Keepin’ the Peace in a Family Business

“The trouble is that not enough people have come together with the firm determination to live the things which they say they believe.” While those wise words from Eleanor Roosevelt usually wrap up Paul Sessions' seminars, they kicked off his presentation during PLANET’s GIC Workshop last week at the GIE+Expo in Louisville, Ky.

As director of the Center for Family Business, University of New Haven, Sessions’ presentation, “Stewardship, Succession and Peace in Your Family Business,” highlights the unique stressors family-owned businesses face and how to maintain the delicate balance to keep things rolling for generations to come.

According to Sessions, 80 to 90 percent of all businesses in the U.S. are family owned, but 70 percent of them fail to reach the second generation. Ninety percent of those that do move on fail to reach the third generation and only 3 percent operate at the fourth generation and beyond. One of the most common reasons for failure? Poor communication.

Because family businesses walk the thin line between personal and professional, solid communication is critical. Communication skills that may seem like common sense are sometimes easier said than done, particularly when emotions are involved, Sessions said. He discussed a flow chart which analyzes how people react to conflict both in and outside of the business:

Step 1: Something happens that creates conflict.

Step 2: The affected person views the event through their personal filters, which Sessions defined as the lenses through which individuals see the world. Often times these filters, which are made up of an individual’s biases, prejudices and beliefs, prevent people from seeing a situation clearly and objectively. They’re often based on assumptions about what people are, mean, think and know.

Step 3: Relying on their filters, individuals will make up a reason they believe the situation occurred. Many times, people expect the worst, or make up a reason they take personal offense to. Sessions warned that these negative ideas are rarely the true cause for the conflict.

Step 4: The affected individual has an emotional response, the most common of which are anger, sadness, happiness, fear or shame.

Step 5: The emotional response triggers a behavioral response.

Before acting on their behavioral response, Sessions suggests a pattern interrupt. Between steps four and five, people should stop and think about the situation. They should ask themselves, “What am I telling myself is happening?” “Is it true?” “What else could be true?” This delay in action prevents people from reacting to a situation rashly and negatively and provides the time to see things from a different perspective. Once the person is calm and collected, they should then choose a behavioral response and act on it.

These communication basics then transfer to the creation of the actual succession plan. According to Sessions, it’s good to start this process early. Identify the family members who possess the skills and values that are truly best for the future of the business. Not everyone is management material, and it’s often difficult to evaluate family members the same way as non-family employees, Sessions says. It’s important family members enjoy what they do - ask them what they want in a career, and be sure not to force them into roles. However, it’s also important to avoid feelings of entitlement. “Longevity does not equal readiness,” Sessions said.

For everyone to know what to expect in the future, a succession plan has to a physical document written clearly and concisely. “It’s not a succession plan when it’s in your head,” Sessions said. Business owners should be sure to not only write it, but share it with their family members, being sure to include a strategic plan, a development plan for future leaders, a transition timeline and an estate plan.

When it’s time to succeed from their business, Sessions suggests owners start by first letting go of the simple things. Leave gradually, and operate for a while in tandem. Avoid the “semi-retirement” trap and really stick with the guidelines outlined in the succession plan. Once you make a clear break, trust that you made the right decisions and don’t come back.