It’s All in The Family: Strategies for Managing Betrayal Within the Family Business

It’s All in The Family: Strategies for Managing Betrayal Within the Family Business

When it comes to betrayal, family business is very different from any other types of business. Because it is based on “family,” there’s the belief that self-interest plays no part in the decision-making. It’s assumed that the “good of the family and the good of the business” take top billing, and all members share the same goals and values.

Unfortunately, the family business can be a cauldron of backstabbing, fraught with past grievances, sibling rivalry, and high-wire tensions. Imagine these emotions in the context of all the decisions a business makes regarding leadership, finances, and strategy.

Sadly, businesses that function like families will rarely survive. By necessity, all successful businesses are meritocracies, and all successful families are bound by unconditional love for each other, no matter the strengths or frailties of the individual members. Betrayal in a family business has the potential to destroy both the company and the family itself.

Harry Levinson, a corporate psychologist and family business advisor, raises a warning that unless families face up to and directly address feelings of hostility, the business will suffer and perhaps die. Bolstering the importance of Levinson’s warning, Family Business Institute in their January 2018 white paper titled “Family Business Succession Planning,” noted the following, “88% of current family business owners believe the same family or families will control their business in five years, but succession statistics undermine this belief. According to The Family Firm Institute, only about 30% of family businesses survive into the second generation, 12% are still viable into the third generation, and only about 3% of all family businesses operate into the fourth generation or beyond.”

Add the possibility of betrayal into this equation and the odds for survival of the family business is even bleaker.  The truth is, betrayal can easily occur due to heightened emotions and the explicit and implicit expectations that are placed on family members by each other.

The phrase, “It’s not personal; it’s just business” just does not apply in family businesses. Even a simple misunderstanding can be seen as a betrayal. Unlike in other business relationships, this involves a vortex of emotions, which can include past rivalries, broken promises, and underlying drama. When you consider that a family unit is based on shared bonds and values, it’s easy to see how much can go wrong if even just one person betrays these values.

It’s clear that any kind of betrayal amongst family members will feel devastating – so how do family members prepare for and bounce back from the inevitable sting? The following are some strategies for promoting an environment that minimizes the reality of serious betrayal:

  • Understand and communicate what your family values are and how they guide your business’ mission, vision and goals.  Also, understand how the business and your family will and should operate independently.
  • Create business and family-related boundaries/governance that applies to everyone involved. These should be formal policies that are universally understood – not ad hoc, case-by-case, application of informal policies. 
  • Recognize – and don’t dismiss – the very real human conditions of ego, pride, greed, etc.  Being related to one another does not eliminate these factors. Being aware and not naive to this can potentially help avoid situations that lead to betrayal.

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