Blood feud

How do you fix a broken family business?

By Alexander Stein
Featured on Fortune Small Business

(FORTUNE Small Business) – “Happy family businesses are all alike; every unhappy family business is unhappy in its own way.”

While that’s not exactly what Leo Tolstoy wrote – and with my apologies to high school English teachers everywhere – it perfectly captures Cindy Conklin’s plight. Conklin (not her real name) is CEO of a small manufacturing company in the Midwest. Her father started the business in a garage 34 years ago.

Now in her early fifties, Conklin took the helm after her dad died of cancer two years ago, leaving no succession plan (we’ll come back to this issue). Last year’s revenues were $2.1 million, up 16% from the prior fiscal year. Although the business is doing well, the same can’t be said for the Conklin family. Today, Conklin runs the company with her husband, older brother, and sister-in-law. She hasn’t spoken to her three other siblings for more than a year.

In conversation with Conklin, I learned that today’s crisis is rooted in a lifetime of buried, simmering rivalries and resentments among the siblings. Conklin’s youngest brother, for example was rebellious from an early age.

“He always wanted to do his own thing,” Conklin recalls. He gravitated to alternative (read, “disapproved of”) behavior and, eventually, drug use. According to Conklin, he also came to resent their father for trying to inhibit his struggle for independence.

By Conklin’s account, her younger sister has been the “prime instigator” in the family conflagration. Conklin recalls that this sister was not particularly close to their father and experienced a difficult transition from adolescence to adulthood. She married but then quickly divorced a career military man who turned out to be abusive.

By contrast, Conklin was always very close to both her parents. Growing up, her father always said that he wanted Conklin to run the company after he died. While Conklin and her siblings were all still at home, their mother went back to school to become a nurse. Conklin remembers coming home from high school to study with her mom, helping her learn medical terminology.

How did her siblings feel about the privileged relationship that Conklin enjoyed with their parents? Conklin’s unequivocal answer: “Resentment. I stepped up; they didn’t.”

As children, the two younger sisters paired off early, joining a community of school friends from which Conklin felt excluded. She and her older brother, by contrast, had an “unshakeable bond” from the start. This early division remains in effect today.

In all of this, the 800-pound question sitting in the company boardroom with no apparent answer remains: Why would a man who spent his life to build a business from the ground up, grooming his own daughter to take his place, knowingly leave no succession plan?

That’s actually a pretty common scenario in family-owned businesses. According to a 2007 survey by Oregon State University and Seattle University, nearly 60% of majority shareholders of family-owned firms are 55 or older, but only 29% of the firms have a written succession plan. Only 40.6% have named a successor and are prepared for transition. Not surprisingly, 50% of family-owned business fail to last beyond one generation.

To me, these statistics point to pathology of near epidemic proportions. Given the importance of family businesses within the general economy, we might consider implementing a national family business triage initiative!

In the months before his death, the elder Conklin’s cancer metastasized to his brain, causing cognitive impairment and profound personality alterations. He became confused, contradictory, and aggressive. One day he would tell Conklin that he wanted her to run the business after he died. The next day he’d tell her siblings something completely different. Although she doesn’t believe he meant it, Conklin once heard him say: “I don’t care what happens after [I die]. It’s not my concern.”

Just the same, there’s ferocious hostility in this statement. Was it really the uncharacteristic outburst of a dying man? His illness was not sudden; there was time for planning. Before the cancer, Conklin says, he was hard working, loving, supportive, and helpful. So why is it that all of Conklin’s siblings left home early, one married an abusive man, one abused drugs, and another became a family therapist?

For whatever reason, the father’s death catalyzed a family breakdown. Rather than banding together to mourn their father and preserve his legacy, the children turned their anger at him – and at Conklin – on each other.

In the year just preceding and just following her father’s death, Conklin struggled to maintain steady revenue; with her attention diverted, the business flatlined but has since recovered. For now, I hear no evidence that the business is faltering as a direct consequence of these familial problems. The major damage is emotional, not financial.

So now what? Freud once said that in case of fire it’s the first task of firemen to extinguish the flames, before seeking the cause. For Conklin, even if I’m right that the inferno consuming her life and business has been smoldering for decades, there’s an obvious urgency to her situation now.

For the business to thrive long-term, Conklin and her siblings must confront and hopefully resolve their accumulated animosities, resentments, and rivalries. Businesses and families can survive for a time while their members torch one another. But there will come a point, as the statistics show, when the fire wins.

Dr. Alexander Stein is a psychoanalyst and consultant in practice in New York City. He is also a training analyst and faculty member of The National Psychological Association for Psychoanalysis, and a principal in the Boswell Group.

Disclaimer: This column is designed for educational purposes only. Due to the individual nature of each situation, Dr. Stein cannot offer advice or suggestions beyond what is presented here. You should not rely on this information as a substitute for personal therapy, or construe it as the offering of a diagnosis or remedy.