Woodbury: Family Business Matters

"I don't trust him anymore."

Those five words, offered by a family business partner when describing her brother, signaled the eventual break-up of the family business. From the outside looking in, you might not suspect the end was near: The business was profitable, growing, respected in the community and several family members had returned.

But the image and the reality were different. Inabilities to discuss frustrations, the lack of ground rules, and differing expectations about decision-making authority were tearing at the fabric that held the family business together.

TRUST IS IMPORTANT

As a business grows and employs more people, trust serves as a lever. If more people in your business earn each other's trust, their ability to take on separate tasks under the umbrella of one business allows for growth, scale and diversification. If those divisions -- such as farming and ranching enterprises, or different geographic locations -- are managed well, it can help grow the business. On the other hand, if an entrepreneur trusts no one, they will be limited to what they alone can manage or control, and generally this limits potential results.

TRUST IS FRAGILE

In the family business, trust is generally assumed because family members grew up together, shared joys and tragedies and vulnerabilities and have a deep and historical bond. It often goes without saying that "family takes care of one another." We want to believe that people are acting in the best interest of the company or family, that they will sacrifice personal gain for organizational progress. So when a family member violates that trust, it seems especially shocking. It's as if they were throwing away the years of good times, happy memories and even the future relationships and goodwill of siblings and cousins.

Consider a family member who buys a new piece of equipment that others think unnecessary. Without discussion and shared agreement about the need for the equipment or the financial return on the asset, family members are left to wonder about the reasons for the equipment purchase. Underneath the question "Why did he do that?" is an element of distrust, a small chink in the family business armor.

Or take the issue of time off. Without a good understanding of what's expected, a family member who takes three weeks off per year is likely to cause a stir if no one else in the company ever goes on vacation. The holiday-taking sibling is seen as abusing the business and "can't be trusted" to sacrifice for the company. Most often the family has no policy regarding vacations. Time off and other key policies are unwritten rules, assumed instead of expressed, and thus ripe for violation.

Family members get frustrated when they don't understand the reasons behind certain decisions, or when they see behavior that doesn't conform to their expectations. They find it difficult to have conversations, and eventually the trust fades.

TRUSTING AGAIN

The first key to rebuilding trust is to communicate. Admit things are getting worse and agree to meet for a discussion. Talk through the circumstances causing frustration and identify points of tension in the relationship. Talk about what you each could do better, and what you expect from your family business relationship. Communicate on a regular basis.

The second key is to change your behavior, right along with your partners committing to change theirs. Then be consistent and follow through on changes you offer to make. Explain the reasons behind your actions and commit to hold yourself and your family business partners accountable.

I can't guarantee that more communication, a change in behavior and discussing expectations will keep the family business intact. But in doing so, the chances of success go up dramatically.

Editor's Note: Lance Woodbury writes for both DTN and our sister publication, The Progressive Farmer. He is a Garden City, Kan., author, consultant and professional mediator specializing in agriculture and closely-held businesses. Over his two-decade career, he has guided many families through inter-generational farm transfers as well as mentored successors. Email questions for this column to lance@lancewoodbury.com.

(MZT/AG)

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