Tom Kaplan, assistant professor of entrepreneurial studies, specializes in entrepreneurship, family business and strategic planning. He has done extensive analysis on the impact of estate taxes on family businesses, and his work has been published in Nation’s Business, Family Business Review and American Business Review. Prior to joining FDU in 1997, Kaplan was a co-founder of the Family Business Forum at Virginia Commonwealth University, Richmond, Va., where he completed a doctoral dissertation evaluating U.S. university-based family business programs. Kaplan has worked closely with FDU’s Family Business Forum, and this article is based on a recent Family Business Forum presentation.

five family business crises — and how to avoid them

by tom kaplan

No one in the next generation is interested in the family business!

Those sounding this alarm must first consider what if the roles were reversed. Would you be interested? Why or why not? In order to grow with the business, family members must experience the business. I strongly recommend holding regularly scheduled family meetings and allowing everyone to have input to create a value statement and mission statement. Involve children when they are young, and hold celebrations that honor family history and traditions. Keep the lines of communication open and make a commitment to inform shareholders. Finally, allow career choice to be a part of your family’s culture. Experience gained in the outside business world may be a valuable asset if the individual returns to the family business.

No one follows through with commitments!

Here again, family businesses need to consider several important questions. What are the consequences for an individual if commitments are not kept? For instance, is there any peer pressure or impact on pay or a bonus? Can this become a learning experience? Rather than waiting for problems to arise, spend some time in advance discussing how problem situations will be handled.

The entitlement mentality has taken over the family!

When it comes to money, call it what it is — compensation, bonus, perk, dividend, gift, help, etc. Can family employees distinguish among the different components of their pay; i.e., the amount of income related to their position from the amount based on family membership? Is their salary competitive in the external job market? Family businesses must think about the firm’s hiring practices for family members. What are the rights, privileges and obligations of having careers in the family business? What requirements would be made for candidates if the same position were filled externally?

No one in the next generation is good enough to take us where we need to go!

Concerns about the next generation exist in every family business (and every family). Preparing for transitions well in advance can help. Family businesses should document and communicate a policy for succession. Consider several questions. Do you want the business to continue into the next generation? How will the next president be chosen? When and under what circumstances would a transition take place? Also, develop policies for the roles of spouses, in-laws, cousins and next-generation children.

Every time we talk to each other, it turns into a disaster — so we’ve stopped trying!

Here’s where you have to return to the values that represent the core of the family and the business. Revisit the goals and expectations required of each family member. Defining a process for communication is the key. Start talking before you need to.

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