Is a family-owned business first and foremost a family, or is it first and foremost a business?  This is a question without an immediate and obvious answer. The most sensible answer may be, “It depends on the specific situation.”  One thing is certain: family + business combinations do not face the same challenges as any other business–they face a few more.  In consulting with your business, I utilize not only my extensive business background as an organizational consultant and former Fortune 500 executive, but also my training and education in the psychology of family systems.

20 Challenges Family Businesses May Face

Family Owned Business ConsultingA family-owned business faces the unique challenges of being a full-fledged business operating in a competitive environment and at the same time being a family with its typical interpersonal dynamics.

Thus, its management is influenced not only by market and economic forces but also by the involvement of various family members (as shareholders, managers, employees, or advisers) and their relationship with each other.

According to an oft-quoted compilation by Lee Iwan, a family owned business may have to confront a myriad of day-today challenges, among which the following may be observed:

Why Dr. Z?

By drawing upon my extensive and successful business experience in large and small privately-held and publicly traded enterprises and on my PhD-level training in psychology, I can offer to my consulting clients all the benefits of a well-informed, evidence-based insight into their family-owned business challenges and situations. My consulting solutions center around the family members who lead and staff the company, by seeking to address the impact of their relationships on the processes, strategies and structures that propel sales and revenue. Often, “People problems are all the problems” a company will have and my extensive training in the psychology of the work environment may be exactly what it takes to analyze, identify and remove the barriers to enterprise growth and to its greater success.

  1. Emotions. Family problems will affect the business. Divorce, separations, health or financial problems also create difficult business and political situations for the family members.
  2. Informality. Absence of clear policies and business norms for family members.
  3. Tunnel vision. Lack of outside opinions and diversity on how to operate the business.
  4. Lack of written strategy. No documented plan or long-term planning.
  5. Compensation problems for family members. Dividends, salaries, benefits and compensation for non-participating family members are not clearly defined and justified.
  6. Role confusion. Roles and responsibilities that are somewhat or wholly undefined.
  7. Lack of talent. Hiring family members who are not qualified or lack the skills and abilities for the organization. Inability to fire them when it is clear they are not working out.
  8. High turnover of non-family employees. When employees feel that the family “mafia” will always advance over outsiders and when employees realize that management is incompetent.
  9. Lack of succession planning. Most family organizations do not have a plan for handing the power to the next generation, leading to great political conflicts and divisions.
  10. No retirement and estate planning. Absence of long-term planning to address the necessities and realities of older members when they leave the company.
  1. Poor training. Lack of a specific training program to integrate family members into the company that provides specific information related to the goals, expectations and obligations of the position.
  2. Paternalistic. Control is centralized and influenced by tradition instead of good management practices.
  3. Overly conservative. Older family members try to preserve the status quo and resist change, especially when it comes to ideas and change proposed by the younger generation.
  4. Communication problems. Provoked by role confusion, emotions (envy, fear, anger), political divisions or other relationship problems.
  5. Reactive thinking. Decisions are made day-to-day in response to problems. No long-term planning or strategic planning.
  6. No exit strategy. No clear plan on how to sell, close or walk away from the business.
  7. Uncertain business valuation. No knowledge of the worth of the business, and the factors that make it valuable or decrease its value.
  8. Limited growth. Problems due to lack of capital and new investment or resistance to re-investment in the business.
  9. Diverging vision. Each family member has a different vision of the business and different goals.
  10. Poor control of operations. Difficult to control other members of the family. Lack of participation in the day-to-day work and supervision required.