News Column

7 Pitfalls That Can Cripple a Family Business

September 4, 2013

Greg Cox

family business
Seven pitfalls can pose particular dangers to a family business (file photo)

The family business is as old as commerce itself. Today, 92 percent of businesses are family-owned and 60 percent of the U.S. workforce is employed in a family-owned business. During the 11 decades that Dale Carnegie has worked with businesses, we've seen a distinction in the specific challenges that a family business faces when it reaches a certain size.

The life cycle of a business begins with a founder that has a vision and recognizes an opportunity to provide a sustainable source of income. As the business grows, the founder will need skilled help to keep the business growing. As the dynamics of the business change, this is where the founder must beware of pitfalls. At Dale Carnegie -- Chicago, we have identified seven pitfalls of the family business:

Pitfall No. 1 -- Informality: Sometimes getting "formal" can be very uncomfortable. Family business leaders often avoid putting formal policies, structure, or plans in place in order to "keep the peace" and avoid conflict, which can often undermine the pursuit of the desired business results.

Pitfall No. 2 -- Isolationism: Family businesses often are inwardly focused. This pitfall has the business miss out on significant insight that could save time, resources, and energy. A family business should seek outside input and expertise from a variety of trusted sources.

Pitfall No. 3 -- Lack of Collaboration: Collaboration is critical. This does not mean to simply "work together as a team," but truly leverage each other's strengths to move the organization forward. Healthy collaboration that builds off many ideas to achieve solutions will reflect multiple, relevant perspectives.

Pitfall No. 4 -- Family Relationships Trump Client Relationships: When family businesses put their relationships with each other ahead of the clients they serve, trouble starts to brew. The successful family business needs to leverage the connection they have with each other to create even stronger relationships with clients.

Pitfall No. 5 -- Emotional Baggage Rules: There is always "history" in a family business. When it gets dredged up, it has a more negative impact than run-of-the-mill gossip. Family members must compartmentalize, control their emotions, and keep attitudes in check.

Pitfall No. 6 -- Generational Conflict: Generational conflict has always been present in family businesses. When you have someone with a great deal of experience (and a legacy point of view) working with a younger person who sees things with a fresh set of eyes and wants to be a catalyst for change, there is bound to be some conflict. Senior family members must be open to new ways of doing things. This engages the up-and-coming family members and allows the organization to tap into next generation ingenuity.

Pitfall No. 7 -- Ignoring the Gorilla: We have often heard the expression, "ignore the 800 pound gorilla in the room." This shows up in businesses where family members have positions solely based on their family status vs. talent and ability. This reality puts pressure on family members to perform well.

The pitfall comes from ignoring feedback and issues that need to be addressed or overlooking good ideas that could bring improvement.

Don't be discouraged if you are facing any of these pitfalls.

Be sure to seek wise counsel, gain insight, and get coached so that you have a plan to address any pitfalls that are evident. By proactively taking the initiative to prevent falling into them, your family business will be positioned to prosper.


Greg Cox is president and COO of Dale Carnegie -- Chicago. Contact him at

For more stories on small businesses and entrepreneurs, please see HispanicBusiness' Entrepreneur Channel

Source: Copyright [Daily Herald (Arlington Heights, IL)

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