How to Thrive While Leading a Family Business

We’ve seen both sides of the spectrum: family executives hating their jobs, their businesses, their families, feeling underappreciated for their efforts, exhausted by all the “craziness,” wanting nothing more than to “sell the damn thing.”  And we’ve seen family executives thrive with rewards that are richer and more profound than a leader of a publically traded company could possibly derive.  The company flourishes, the family has a collective purpose that brings them together, and the kids prosper.

So, naturally, we wonder, “Why do some executives thrive while others wilt?”

Family businesses are inherently messy.  Work and life are almost inextricably intertwined.  With so many things going on concurrently, family executives either get swept up in a virtuous cycle or a vicious cycle with very little in between.  Leaders who thrive in this environment embrace and use this messiness.  They can be all sorts of people – introverts, extroverts, operations-oriented folks, great sales people, men, or women.  But what we see in common in thriving family business leaders is that they get four things right:

Four separate rooms
Life in a family, business can really be a pressure cooker because the business discussions continue around the dinner table and in the bedroom.  There sometimes is no separation between work and family, home and the office.  The CEO leaves a meeting at the office with the CFO, his daughter, and he goes home to her mother, his wife and joint owner of the business.  This entanglement of relations runs so deep that the only leaders who thrive are those who have learned to explicitly separate their lives into four separate rooms: one for the business managers, another for the board of directors, yet another for the owners, and a separate one for the family members.

Consider your own home:  You have different discussions in the kitchen, the bathroom, the bedroom, and the living room.  Of course there’s some overlap: Nothing is hermetically sealed.  There are doors and windows that open, but there are rules – spoken and unspoken – regarding what can be discussed where.  And things must be discussed.  Owners, for example, need to talk about ownership issues away from board directors, family members, and employees.  The thriving leaders we see know how to get their own houses in order.  They build discussion rooms – not silos – and teach others to work within the spaces that they’ve created.

The crocodile brain
Thriving family business leaders know how to manage what neuroscientists have named the “crocodile” brain, so-called because it is controlled by gut emotions; thought processes are limited, and impulse control is nonexistent.  The crocodile brain is the reason that people are not rational actors; it explains why decisions should never be made without trying to help people process their feelings, their passions, their rivalries, and their egos.

After placing people in the right room, thriving leaders deal explicitly with the irrational side of decision-making.  Think about it:  in a family business, owners can never decide to buy or sell a business based entirely – or even primarily – on the basis of money.  When they are on the surface deciding whether or not to acquire a company, thriving leaders in a family business are really thinking about that acquisition’s impact on the identities, roles, relationships, and personal finances of others.

Thriving leaders don’t ignore the crocodile brain and are not afraid of the crocs’ behavior.  We see these leaders putting the croc issues on the table for careful conversation.  “Gosh, it hit me, this acquisition could really change your role in the business.  Let’s talk that through,” is the type of leadership behavior we see them exhibit.  They make the emotional side of business safe.

A place to land
Thriving leaders in family businesses help to create places to land when their gig is over.  They build for themselves and others a number of attractive paths forward after the day-to-day spark goes out of life in the C-Suite.  Often in corporate businesses, you’re either in that executive suite, or you’re out – you go to work at another company.  By contrast, in the best family businesses, the aging executive doesn’t just move over to the curb.  He or she stays around as a board member or shareholder or special advisor, or on special projects.  Thriving leaders embrace the reality that they can add real value after life as a business executive.  Their identity is not all tied up with living and working in the C-Suite.

This is the other side of succession.  Thriving executives don’t just say, “Who is going to be our next CEO,” but also, “What can I do next?”  Think of the four rooms we talked about earlier.  Once they depart the C-Suite, thriving executives still use their wisdom and experience to make valuable contributions in the other three rooms.  They can go up to the board. They can go up to the shareholders’ council.  Or over to a family leadership role.  They may also decide to take up a philanthropic role in the family foundation.  Thriving leaders appreciate that all of these roles are vital and necessary in family businesses.

Passion and wisdom to develop the next generation
Thriving leaders’ greatest joy is to see their children succeed in their business and as owners.  They get it that their own role, while central, is temporary.  For example, in a recent cross-generational ownership meeting with a client, a 26-year old, introverted next generation member surprised the eight owners in the meeting with a fundamental insight into the future of their business.  You could feel the leadership baton starting to be passed.  The current generation, three seasoned business executives in their late fifties, beamed with pride.

Developing the next generation is really tricky.  These thriving leaders have great wisdom in how they do it:  They don’t coddle, they challenge.  They know their kids will lead differently than they did and accept that fact.  They provide real jobs with real challenges.  They let their kids fail and then help them up.

As you can see, we are talking about a very different leadership task than in corporate environments.  The rewards are different and deeper.  These thriving leaders find meaning, money, and mentoring in ways not available outside family businesses.

Are you a thriving leader?  Do you know of others who are? As a test, ask yourself, “How many of these four leadership behaviors are shown by you and others in your family business?”

Josh Baron and Rob Lachenauer

Josh Baron is a Partner and a co-founder of Banyan Family Business Advisors, and author of the forthcoming book Great Power Peace and American Primacy: The Origins and Future of a New International Order. Rob Lachenauer is the CEO and a co-founder of Banyan Family Business Advisors, as well as co-author, with George Stalk, of Hardball: Are You Playing to Play or Playing to Win?