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As I have worked for several family-owned businesses, including that of my own family, The Hadler Companies, this article certainly caught my eye.  Most family businesses do not survive to the third generation of ownership.  And in this current market, more family-owned businesses are having trouble in the second.  Here’s some food for thought from James Lea of the Orlando Business Journal.

‘Big happy family’ biz should treat workers like employees

Article by James Lea, Orlando Business Journal

August 15, 2008

You’ll hear it if you hang around family-owned businesses long enough: “We’re just one big happy family here.”

It’s a fine sentiment, meant to convey cohesiveness, warmth and other positive feelings between owners and non-family employees. The trouble is that in most cases, it’s not really true. And repeated often enough, the one-big-happy-family mantra can create misperceptions and expectations that aren’t good for either owners or employees.

Surveys suggest that employees tend to receive better treatment from family-owned companies than from other kinds of businesses. Health insurance and retirement benefits may be a little more generous in family companies that can afford them, and there are more likely to be such amenities as flexible working hours and even on-site child care. Family owners and managers seem to take a real interest in their employees’ welfare, extending family-style consideration to everybody who works under the company’s roof and expecting family-style commitment in return.

That’s good human relations and genuinely nice corporate behavior. It can boost overall productivity, bolster employee loyalty and make the workplace more comfortable for everyone. But it’s not doing anyone any favors if it blurs the boundaries of authority and responsibility, substitutes paternalism for solid management and makes people forget that the family business is a business and not a day camp. Here’s an example of how that can happen.

Joe and Margie opened a six-booth diner in a town near Denver in the mid-1960s — a classic mom-and-pop business where they worked from 5 a.m. until 9 p.m. six days a week. Instead of going home after school, their kids finished their homework on the restaurant’s back tables before pitching in to help serve the dinner crowd. The cook and two waitresses joined in the family fun and heard all the family troubles, so it was easy for everyone to think of Joe and Margie’s business as one big happy family.

Maybe it was the hard work, the catchy menu themes, the constant attention to quality or the cost of the menu items, but the diner was a success. In 10 years, Joe and Margie’s had expanded into a 200-seat restaurant. But there was trouble in paradise. Although the storefront eatery was now a big enterprise, one-big-happy-family had become institutionalized in the company. The employees got good salaries and better- than-average benefits. What they didn’t get was a clear message that they were the employees and Joe and Margie were the employers.

Discipline was loose. The staff decided when to take weekends off, then sought salary advances to finance the spontaneous holidays. Joe and Margie forgave infractions and took up the slack, acting more like mom and dad than president and vice president. Workers were always referred to as “the kids,” never “the employees.” When someone quit, finding a replacement usually took less than 48 hours. The word was out that at Joe and Margie’s you didn’t get hired, you got adopted.

Customers loved the dining room’s cheery atmosphere and the staff’s beaming faces, but the “happy family” took its toll on Joe and Margie. They were virtually the only ones with any real sense of responsibility and they couldn’t understand why. They gave the “kids” so much. Why didn’t the “kids” give something back?

Although they’d grown up with it, Joe and Margie’s own children were confused and frustrated by the persistent Brady Bunch mentality. It was hard to tell the heirs from the rest of the crowd when basic management decisions were thrown open to the democratic process.

“We should put this quarter’s profits into upgrading equipment, but if all of you really need raises that badly …” would be typical discussions.

The children had considered taking over the family business one day, but they were interested in running a restaurant, not a welfare shelter.

Last year, the restaurant closed when Joe and Margie retired. Perhaps with good, if misguided intentions, they had tried to make everyone who worked for their family business into a member of the family. But even in the most close-knit business families, the business is not the family and the family is not the business. The two exist for different purposes, have different objectives and require different kinds of leadership. It’s important to keep clear the lines of distinction between them.

Concern for employees is one of the characteristics that make family-owned companies the backbone of the U.S. economy. But it’s downright unhealthy for a family business to let that concern push it toward the artificiality of “one big happy family.”

James Lea is a professor at the University of North Carolina at Chapel Hill and a family business speaker, author and adviser. Contact him at james.lea@yourfamilybusiness.net.