Avoiding the “60% Problem”
A few weeks ago one of my “tweeps” (Twitter peeps) shared a news article about family business that quoted an interesting statistic.
The field of family business as a specific “unit” of study still being relatively new, there aren’t necessarily lots of stats to choose from when someone sits down to write such an article.
It seems like the same studies, usually decades old, have their stats recycled and re-used over and over again. But that’s a problem for another day.
Sixty Percent of FamBiz Failures
Here is a quote about the main stat from the story:
“Sixty percent of the failures were due to breakdowns in
trust and communication within the family unit”
I’d like to address the 60%, but first I need to fill in some of the context. The sentence before the one quoted above read: “A comprehensive study identified reasons why family businesses don’t last.”
If we wanted to add to the list of things that “don’t last”, we could add businesses in general, and of course, people, because we will all eventually die.
Okay, now that I dealt with my pet peeve on how family business stats are thrown around by some writers, let’s get to the good stuff.
Breakdowns in What?
Let’s look at the “problems” with family business that were mentioned as being the most prevalent, i.e. 60%.
“Breakdowns in trust and communications” is how it was worded, and I take that to mean “breakdowns in trust” and “breakdowns in communications”.
Of course one could make the argument that “trust and communications” are so intertwined that they are actually inseparable in this context, and I would not argue against that either.
The fact that they were “lumped together” in the first place sort of makes that point already. But just for this exercise, let’s begin by looking at them separately.
Breakdowns in Trust
In order for there to be a “breakdown” in trust, there needs to have been some trust to begin with.
Here is the presumed scenario: 1. There was trust; 2. It broke down; and 3. Eventually the family business was no more.
Presumably, if the trust had remained strong and not broken down, the business would still be around.
It would be really interesting to look at the details around the trust breakdowns, because I have some theories I’d like to check out if we could see the actual data.
I’d be willing to bet that the trust level between individual pairs of people did not change very much over time, because in my experience it usually stays pretty constant.
However, changes, over time, in the make-up of the overall group running the business, can certainly result in a trust level that gets worse.
Breakdowns in Communications
Communications breakdowns are often easier to see than trust issues. That’s because when the issue is trust, that fact tends to be kept mum.
When we picture communication problems, we may be inclined to think about screaming matches and altercations that people in the office can see and hear.
I’ve known some family businesses that are no strangers to these types of scenes.
But I think that the kinds of communications breakdowns that are at the root of family business failures are more often the silent type.
Sometimes the screaming doesn’t happen anymore, because nobody is even talking to anyone else anymore.
Reasons and Opportunities to Talk
The good news is that trust and communications issues don’t usually just show up one day. They are usually gradual. Why is that good news? Good question.
To me, if a situation is slowly degrading, there is an opportunity to address it and try to rectify it. Of course there does need to be a willingness to actually work on it.
Family members who are involved in owning and/or managing a business together have plenty of reasons why they need to be in regular communication with each other.
Sometimes they don’t create enough opportunities to talk.
My best advice for families that are worried about these “trust and communications breakdowns” is to schedule regular meetings to talk about working ON their business.
Usually at least once per quarter, key family members need to come together and air things out, so that things don’t get worse.
If you need a “referee”, find one. But please do it.