Addressing the Elephant in the Room in Family Businesses

Family businesses are unique entities that blend personal relationships with professional responsibilities. While these businesses can be a source of pride and an embodiment of transgenerational values, they also come with a unique set of challenges that are often overlooked or unaddressed with devastating consequences in family relationships and business future. In this article, we’ll explore the “elephants in the room” that frequently undermine family businesses, preventing them from reaching their full potential.

1. The Succession Planning Struggle: The Founder’s Trap

One of the biggest issues in family businesses is succession planning, often referred to as the “elephant in the room.” The older generation, particularly founders, struggle with handing over the business to the younger generation. Founders often view their business as their “baby,” and the emotional attachment makes it difficult to let go. This resistance can result in the process of succession dragging on for years, sometimes even decades, and in some cases, it never happens. This phenomenon is known as the founder’s trap.

In the founder’s trap, the founder holds on tightly to decision-making, micromanages operations, and fails to build teams to take on different roles and delegate responsibilities. As a result, the business stagnates and fails to evolve, often leading to its decline or eventual death. Without proper succession planning, the company doesn’t grow, and the next generation is left waiting in limbo.

2. Family Dynamics and Blurred Boundaries

Another major challenge in family businesses is navigating complex family dynamics. In many cases, alliances and coalitions form among family members, further complicating business decisions. For example, one family member might form an alliance with the founder, while others feel excluded or scapegoated. A mother and first daughter might form a strong coalition, leaving the second daughter marginalized, or a father and son may form an alliance against the more qualified sibling.

In family businesses, the boundaries between personal and professional life are often blurred, and these dynamics inevitably spill over into the business. Conflicts that might be manageable in a professional setting become deeply personal, leading to emotional cut-offs, where family members either stop communicating entirely or remain physically present but emotionally distant. For example, a son may distance himself emotionally because of frustration with a father who refuses to step down and pass on leadership.

3. The Role of Envy

Envy is another “elephant in the room” in family businesses. It often manifests when one family member holds authority power and influence while others do not. A sibling in a leadership position may become the target of envy from other siblings, leading to intense disputes, emotional cut-offs, and lingering resentment. This maladaptive dynamic can damage not only family relationships but also the health of the business, as envy fuels conflict and undermines collaboration.

4. The Impact of Narcissism

In some family businesses, the founder’s personality can exacerbate these issues. A narcissistic founder, driven by a strong sense of grandiosity, entitlement and self-importance, may be unwilling to relinquish control, even when it’s clear that the business is struggling and needs to pass on to the next stage. This phenomenon is called ‘perverse leadership’, where the leader holds onto power at all costs, refusing to sell or pass on the business to the next generation despite the evident decline of the company. The founder’s inflated self-image and self-importance blinds them to the need for change, creating a scenario where the business is destined to fail under their leadership.

Conclusion: Navigating the Complexities of Family Business

Family businesses face unique challenges that are deeply rooted in intrapersonal and interpersonal dynamics. From succession planning to family alliances, envy, and narcissism, these “elephants in the room” can severely impact the wellbeing, success and longevity of the business. However, by addressing these issues head-on, family businesses can grow, evolve and thrive.