Avoiding a psychological thriller

Psychological dynamics can determine who really holds the power in the business. What if one member embezzles money, or knows how to play you to their advantage?

Psychological dynamics can make or break family businesses. It was Sigmund Freud who said love and work give us our humanness and self-esteem. The problem for many family businesses occurs when there is a clash between love (the family) and work (the business). Family ties and relationships are part of the fabric of every family business, and the key word here is family.

There are many examples of these dynamics in family businesses: the patriarch who refuses to let go and the offspring brought into the family business straight after school and given the power to hire and fire. Then there is the often told story of three brothers who run the business: one is the director of sales, another is the director of operations and the third runs finance. The father decides to pay the school fees for one of them, and then the wives start fighting among each other.

Adelaide-based family therapist Rosemary Freney says these dynamics affect every family business, and sometimes it can be disastrous. “It’s like any family but only so much worse,” says Freney.

“The dynamics are mediated by personality,’’ Freney says. “There are all sorts of different entrepreneurs and if you look at the entrepreneurs determination and belief that they’re right, that often clashes with being a parent.”

Her main area of expertise: dealing with highly dysfunctional family businesses, where the family behaviour is totally mixed up with the welfare of both the family and the business. The trouble comes when Freud’s forces of love and work have two very different agendas. There are cases where some families are reluctant to deal with the issues.

“I have examples where kids have embezzled $200,000 to $300,000 from a family business, the parents won’t call the police, they won’t do anything and there is no consequence for these kids and they can hold families to ransom,” she says.

One of the big issues, she says, is when kids are not measuring up to standards. “Why did we start family businesses originally? It was to give someone a job and that’s traditional over the centuries. What’s now happened in the age of professionalisation is that some of the kids don’t stand up to the mark so they actually can’t hold their own in a family business without being given special treatment. To me that’s what’s at the heart of a lot of issues in a family business. One of the issues is fairness. How do you compensate the child fairly who isn’t up to holding a role in the family business?”

She says one way families can deal with this is to subsidise the offspring in an area outside the family business, give them a start somewhere else. In effect, the family business is assisting them not to work in the business, although they might still receive dividends.

Another big issue is the patriarch having difficulty passing on control, something that might explain why so few family businesses have developed good succession plans. “We always look for the person who has the most influence in the family and that is often the mother. Often we work through mother, who often can work on Dad,” Freney says.

Family psychology is so important that all FBA Accredited Family Business Advisers – and that includes lawyers, accountants, financial planners and marketers – are now trained in systems analysis, a cornerstone of family therapy. With systems analysis, individuals cannot be understood in isolation from one another. They are part of the family and the family is an emotional unit comprising systems of interconnected and interdependent individuals and alliances. Nobody in the family unit can be understood in isolation from the system.

This means, for example, that a family accountant who has been trained in systems analysis may give sound advice, but will then have to determine how that would go down with each family member.

Freney says the best way to deal with problems is to establish a safe place where people can get things out in the open. “It’s about having a lot of people in the room,” she says. “So you might have the accountant, the lawyer, the family business adviser, the family business therapist and the family in the room. This is after you have spoken to each person individually. Each person has to be talked to, assessed what their style might be. It’s about making a climate of safety and inclusiveness. Often you’ll hear the kids saying well they didn’t talk to me about it. It’s about having it out in a safe environment with people they can trust.”

Organisational psychologist, Leanne Faraday-Brash, says it often comes down to the business founders giving up on the model that made them successful, and making way for the new generation.

“Maybe they’ll give the young person their own division to run and the young person knows they have to sink or swim,” Faraday-Brash says. “Maybe in the case of people like the Packers, Kerry’s interest and passion was in television and James had to make a name for himself and decided to do that using casinos because he needed to step out from underneath the shadow of a strong and uncompromising father.”

Another good example is the Smorgon dynasty. In the beginning there was enormous love and respect for the patriarch and everyone fell into line. But when there was no longer a clearly defined leader, the family members decided it was better they each went their own way to make their own mark, without anyone feeling they were carrying responsibilities for anyone else.

As Faraday-Brash says, that required a lot of emotional intelligence. Many family businesses could do with that when they work through those psychological dynamics. That means they have to be prepared to do the hard and confronting work to keep the family business together.

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