The Rise and Fall of a Family Business

A family’s once illustrious oil and construction business was a giant in the industry, but following the death of the founder, the family’s inability to resolve their disputes led to its downfall. While the arguments and issues that arose from his family’s conflict may have devastated Doug Box and his family’s relationship, it succeeded in creating some key lessons for family business owners to avoid making the same mistakes.

Go “Below the Line” to where the real issues lie. 

  • Family business is an emotional system. The emotions sit “below the line” and are hidden from those outside of the business. Things like concerns, interests and fears live in this category.
  • Get the problems out in the open and talk about them. Letting issues and conflicts fester will never help, it will only make things worse.
  • Don’t ignore the emotional issues in the business, because emotion will always be a factor in a family business.

Keep an open channel for trust and communication. 

  • Most of the problems that families experience come as a result of a lack in communication and trust between family members.
  • It is imperative to have an avenue to resolve issues and conflicts. This needs to be agreed upon in advance by all involved. A regularly scheduled time is needed to discuss the “below the line” issues so that problems don't fester.
  • It’s advisable to include non-biased advisor(s) in this discussion so there is a tie-breaker or neutral party to help settle disputes should conflicts reach a stalemate.

Succession planning/implementation should be a PROCESS not an EVENT. 

  • Succession planning is something that will take time. Even with all pertinent transition components in place, like buy-sell agreements, a chosen successor, and an estate plan, businesses can still fail.
  • Greed and fighting over money will not eliminate the conflict, it will only make things worse.
  • Going to court over disputes will turn the issues of a business into a spectacle. People may think that a judge can settle a conflict, but judges only rule on the law, not what is best for the family.

Implement a system of self-governance: structures & documents.

Structures – These are systems of checks and balances that should be put in place to maintain a homogenous business and family relationship.

  • Family Meetings
  • Board of Directors (with voting power)
  • Family Council
  • Advisory Board (non-voting)
  • Family Retreats

Documents – Written guidelines for running the business that are agreed upon together and hold everyone accountable to the same set of standards.

  • Family Mission Statement
  • Family Constitution
  • Family Bylaws

Doug’s Five Commandments for Family Business

  1. Anything with more than one head is a monster. Doug’s brothers clashed with one another on the direction of the business and who would run what. Find a consensus, don’t pull in opposite directions.
  2. Prune the family tree. Sometimes people are toxic to a business and aren’t necessarily cut out for specific roles. If there's an imperfection, separate it from the rest, so that it doesn't spread.
  3. Thou shalt not fire a sibling. Firing a sibling won’t solve problems, it only worsens the emotions and family dynamic behind it. Sometimes people aren’t right for their position in the business, but just firing them won’t help. This returns to the point of “pruning the family tree”. Try to find a solution that works for everyone.
  4. Thou shalt not sue a family member. Lawsuits don’t solve the conflicts in a family business. They only settle disputes of financial circumstance. A judge can't help a family's emotional problems.
  5. Thou shalt engage in alternative dispute resolution. What are we going to do if we can’t agree? This goes back to the idea of having structures and documents in place to hold everyone accountable. If a dispute can’t be handled, take it to the Board of Directors or Advisors for non-biased dispute resolution. Proactive is better than reactive.

Family businesses are all vastly different and can be affected by different circumstances and factors. While there is no fool-proof method for family business success, there are guidelines that can point the way. Doug Box and his family experienced the incredible highs of family business success and the terrible lows of failure. His family learned the hard way about what not to do in a family business.

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