Coddled Relatives Can Kill a Family Business

Denis was a bright, handsome, 45-year-old French executive who had failed his way up the ladder—almost to the top of his family’s fourth generation perfume business.

As the eldest son of the family patriarch, Denis went directly from university into the family business. During his entire career, he worked in his father’s span of control, reporting directly to his dad within six years of joining the business.

Denis has always been the presumptive heir apparent for the CEO position. The apple of his father’s eye, Denis could do no wrong, including doubling a sales force while halving sales and running a new cosmetic division into the ground. Each of these career steps led to more and more responsibility befitting a rising—not a failing—executive.

Non-family employees, knowing that someday Denis would be their boss, kept their mouths shut—or exited the organization, leading to a drain on talent.

Ultimately, however, the other family owners of the business had to end this dangerous game of “chicken.” Denis’s had risen high enough in the organization that underperformance was becoming a threat to the health of the overall business.

Worse, Denis’s cavalier attitude to the firm’s values—launches of new fragrances hawked by aspiring actresses who were given million dollar contracts; business budgets that were set and missed with no consequences—threatened the very fabric of the of the organization. Another upward failure could be financially calamitous.

The owner group slowly, cautiously, raised the issue of Denis’s performance and behavior with the patriarch. The patriarch kicked up a storm, but with his eyes pried open, he reluctantly let his son go.

Denis broke down and admitted to one of us privately that he had been totally in over his head in his job: “I’ve never worked anywhere but in our family’s business. I don’t have the skills to be an executive. What the hell am I going to do now with my life?” We empathized with Denis. Throughout his career, everyone had acted with the best of intentions towards him. But because he was a family member, likable and protected, everybody treated him with kid gloves.

We have run into Denis-like characters in family businesses around the world. And we have come to realize that the situation nearly always end badly — both for the business and for the individual. When exposed, the coddled family member often feels such shame that he or she chooses to give up all interactions with the family for three or more years.

How can you avoid this tragedy from happening?

Here’s a quick test to indicate whether you are enabling a family member. If you answer “yes” to at least four of the following questions, then you are probably cocooning, indulging, overprotecting—in short, coddling—a family member:

  1. Has a family member worked exclusively in the family’s business?
  2. Has he reported within his parent’s span of control for most/all of his career?
  3. Has she never received 360 feedback on her performance?
  4. Is the family member paid above the market-based compensation for his position?
  5. Is the family member’s behavior often outside the boundaries of acceptable value-based behavior of the company?

If you detect a problem, you should take immediate measures. Here are some remedial steps to be considered by the various players:

Overindulgent parent: It is the responsibility of the family owners to set things right. This almost always involves adopting a merit-based system— carefully, fairly. This isn’t easy. Altering what are often generational-old family employment policies can be upsetting to the family, but it is necessary if you want to stop strangling your business. In family businesses, merit-based systems mean both that family employees are in explicit competition for positions with non-family members in the business, and that family members receive supplemental feedback to ensure that they learn and grow. If your family business has a board with outside directors, consider enlisting them in the sensitive task of gathering honest feedback and delivering it to family employees

Coddled individual: You need to get outside of your parent’s span of control. Given your special treatment, it is likely that you are now in a job that requires more competence than you currently have. Working in a job that is beyond your capabilities is not good for the business—or for you. Continued coddling is toxic to your sense of achievement and self worth. Find a place in the business where you can display your talents. Take a leave of absence and work at another firm. Wherever you go, actively seek more honest feedback.

Non-family employee: You are in a difficult position. Providing candid feedback to or about the coddled individual can get you fired, as happened to one of our friends who worked in a family business. However, all is not lost. Most family businesses have long-term employees who have earned the deep trust of the leadership over several decades. If you are one of those people, you may be in a unique position to carefully raise the need for action. If you are not in that position, seek out those who are and share your concerns. When you do have the dialogue, make sure to frame it as concern for the long-term health of the business and for the individual in question.

What’s happening in your family business? Do you have a Denis who is being coddled and cocooned from the realities of everyday business? Have you tried intervene? What happened?

Or are you Denis?

First Published: 19 Aug, 2013. Harvard Business Review