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How to Navigate the Complex Dynamics of Family Businesses: Practical Advice from a New York City Psychologist

Family is often the source of our greatest joys,and also of our greatest conflicts.  Similarly, business owners often find that their business can provide great financial security, yet also great financial responsibility.  When we combine family and business, the potential for highs and lows can become even bigger.

As a clinical psychologist in New York City who works frequently with family businesses, I’ve witnessed the peaks and valleys firsthand: families who capitalize on their ability to count on one another in a unique way that gives them an advantage over their competition; and families who feel hamstrung by a “weak link” in the family business who would have been fired or replaced long ago if not for familial obligations.  While the former is glorious, the latter is a hotbed for resentment and wasted energy.  If you’re struggling with the latter, here are some tips to help you navigate:

  • Who’s responsible for what? Ask each family member who is part of the family business to write what they feel is an accurate description of their current duties, and what their “dream description” is.  This is often an enlightening exercise to help clarify basic misunderstandings about goals, dreams, and realities.

  • What happens if responsibilities aren’t met? Ask each family member to describe what they imagine are the effects on the business if their responsibilities aren’t met, and to describe what consequences (if any) they feel should happen on a weekly, monthly, or quarterly basis if those responsibilities are not met.

A family discussion something

  • Ask each family member to describe what they feel is their greatest contribution to the business, both in terms of ongoing contributions and “all time greatest” contributions.  Ask them to indicate if they feel these contributions are recognized and valued.  If they do feel recognized and valued, ask them to indicate what helps them to gain this feeling; if they don’t feel recognized and valued, ask them to describe what would help them to gain these feelings.

  • How to deal with dead weight?  Decide how much (if any) you’re willing to pay in what is basically a “ghost salary” for a family member who is unable or unwilling to pull their weight.  Consider offering “dead weight” people the option to take that ghost salary as a percentage of annual profits.  This will at least get them aligned with your interests in profits; and force them to recognize if they might even be getting in their OWN way by refusing to step out of a role that could be more profitably by someone else.  This also forces the person to take ownership of the fact that they are actually not a fully contributing member; which often alleviates a lot of unconscious resentment from family members who previously had to deal with passive aggressive behavior from someone who SAID they were on board but never acted like it.  Yes, in an ideal world there would be no ghost salaries because each family member would always meet their responsibilities-- but if that isn’t happening, what is the most pragmatic (and ultimately profitable) way to deal with it?  Don’t get mired in “oughts”.  Figure out a plan to deal with what’s actually in front of you so that you don’t have to keep wasting energy managing someone who is fighting you every step of the way.  

  • How to navigate generational leadership changes? When it comes time for succession planning, ask the current leader to outline their ideal timeline.  Also ask the rising leaders to do the same.  Discuss together, and agree on at least a skeleton plan.  Put it in the calendar.  Meet every week, month, quarter, or whatever frequency is appropriate based on your timeline to discuss progress or changes.  Put the meetings in the calendar at least a year in advance so that everyone is “on the same page” about the frequency and dates of these meetings. The idea is NOT necessarily to adhere in a rigid fashion to the succession timeline, but rather ot be conscious of changes to it and meet to discuss them in a cohesive manner so that things don’t “drift away” or get “lost in the shuffle”.  The succession timeline can be a “rough draft” or even  a “placeholder” but having it in writing will help everyone to mentally, emotionally, and logistically get the ball rolling.  While the succession timeline can be flexible, the meetings to discuss progress or changes to it should be a more solid commitment from all involved.

There are obviously more challenges than space permits me to address here, but I hope you found these ideas helpful!  Family businesses can be incredible sources of both income and closeness, when boundaries and expectations are clear.  Feel free to reach out if I can help further– in the meantime, wishing you, your family, and your business all the best.


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