Monthly Archives: January 2018

Don’t Ignore the Elephant in the Room

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One of the most common and pervasive causes of family tension that I have learned over my years as a Family Business consultant is that every family business has what is commonly referred to as having “elephants in the room.”

According to Wikipedia, an Elephant in the room is an “English-language metaphorical idiom that means that there is an obvious problem or risk that no one wants to discuss, or a condition that people do not want to talk about.” This has been a challenge for me coaching family businesses. They find merit in pursuing governance but when it’s time to talk about forbidden issues and I press them to let these “elephants” out of the room, they become uncomfortable and prefer to share the issues individually and in complete confidence.

For the sake of discussion, the word “elephant” suggests that the problem is so big and so heavy that no one wants to confront it or try to move it.

By virtue of its size, it takes up so much energy, time and productivity. The phrase “in the room” implies that the issue is large that no one can help but notice it. And since it is in the middle of the room, it means that family members have deliberately avoided and walked around it and worse, pretended it is not there rather than deal with it.

For family enterprises, the term refers to a question, problem or controversial issue that is obvious, but which is ignored by family members especially the business leader, generally because it causes embarrassment and may “rock the boat.”

Rocking the boat means stirring up trouble where none is welcome, disrupting things, promoting disharmony, upsetting family members and causing disagreement.

There are qualitative truths that business leaders (usually patriarchs) must understand about elephants in the room:

  1. Ignoring the elephants in the family business does not make them go away. In fact, once they have found a home, they tend to stay for good
  2. Baby elephants tend to get bigger over time. Most of the time, the problem starts small and escalates into something weighty
  3. I am also highlighting the top “elephants” that must be addressed immediately lest setting them aside can cause disruption and will throw the family business off-course creating unnecessary frayed nerves and strained relationships:
    • A “Fredo” or a black sheep family member causing problems
    • Sibling rivalry spilling over to power struggle
    • Next generation sense of entitlement
    • Patriarchal Shadow (refusing to hand over power to the next generation)
    • Misaligned ownership
    • A wide array of Conflict of interest and self-dealing among family members
    • No succession plan in place
    • No estate planning
  4. Having an elephant in the room is demotivating to the family and the business as well as to non- family members especially the professionals who will not hesitate to abandon ship when these issues are wantonly ignored by the patriarch
  5. If the elephant is not dealt with, the leader/patriarch is perceived as weak, ineffective, bias, and lacking in leadership skills

The consequences of ignoring “elephants” are extremely risky! And the “do nothing” attitude, aggravated by a procrastinating mindset among family members should never be an option! As a business leader and family member, it is important that you deal with these elephants with the help of experienced family business advisors before it’s too late.

Therefore, as the head, perhaps it is high time to ask yourself: Are you ignoring and tolerating “elephants” in your family business?

 

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Stop Behaving Like a Father

I want to start 2018 by upsetting the family and business systems in a positive way.

Knowledge is power and ignorance breeds conflict so allow me to share a powerful quote from Prof Kim Eddelston related to a “Fredo” child or better known as a black sheep family member,

“As Fredo demonstrates, these bad apples can disrupt both family relationships and the firm. Continuing to reward Fredos while ignoring their damaging behavior leads to more problems: the child’s sense of entitlement increases, higher levels of relationship conflict in the family firm result, and more problems with productivity and teamwork emerge.”

Unmasking Fredo

A “Fredo” behavior rears its ugly head when the business leader, usually the patriarch, behaves more like a father than a business owner and his actions are manifested in many ways:

  • Bias in choosing family over the business
  • Is motivated in hiring family members regardless of their qualifications and competence
  • Failure to enforce discipline against the erring or underperforming family members

With the next generation family members getting “kid glove” treatment, a “Fredo” will naturally surface and is emboldened to flaunt his or her entitled behavior.

Paradoxically, as the parents continue to ignore the telltale signs of misbehavior, they remain hopeful that their “Fredo” will change and become motivated. Despite the “Fredo” child’s inadequacies, they reward him or her with promotions and bigger compensation.

Creating this environment will naturally make the child demonstrate poor business decisions, commit abuses, initiate tension against his or her siblings and inevitably create conflict after conflict with whoever crosses his or her path. This phase is characterized with constant clashes during meetings, poor performance, high employee attrition rate and professional managers leaving their jobs as a result of the heightened conflict.

When the “Fredo” child is left to do things on his or her own, the disruptive behavior will worsen over time and the acrimony spilling over to the rest of the siblings. When the parents are no longer around, the conflict escalates to an ownership tussle among heirs.

In “The Godfather” novels, Vito Corleone realizes his son Fredo’s shortcomings, but he insists that Fredo, like his siblings must also be given the same opportunity in the family business.

Parental Action Spells Danger

I have witnessed many family businesses led by patriarchs, where the dysfunctional behavior of their “Fredos” are generously rewarded by way of higher pay and new positions in the hopes that the change will motivate them to perform better.

The actions are dangerous, unwise and counterproductive. In the absence of any deliberate effort to contain an aberrant family member, any form of appeasement that parents do to win their “Fredo” to their side will likely fail. And to rub salt into the wound, business owners may unknowingly foment a conflict if they are currently doing the following:

  • Rewarding an underperforming family member
  • Tolerating the family member’s bad and disruptive behavior in the workplace
  • Continually providing financial support to non-working family members
  • Appointing unqualified family members in managerial positions and worse, elevating them to the Board of Directors
  • Giving equal compensation to active family members
  • Giving higher compensation to family members over professionals
  • Not subjecting active family members to performance and Accountability Rules
  • Flip flops on the issue of wanting to retire but refuses to relinquish control
  • Letting the next generation family members decide for themselves on the issue of succession and direction of the business but retains the patriarchal shadow