Family businesses are unique entities that often face challenges in leadership and succession. In our many years of practice, we have encountered a variety of family business structures across multiple industries. From siblings and in-laws to parent-child partnerships, each configuration brings its own set of opportunities and risks.
In this article we will explore common leadership structures in family business, the challenges they present, key factors that can undermine the success of family business partnerships and the importance of robust governance in driving success.
We can therefore better understand how to navigate the complexities of family business leadership and ensure long-term success.
Common leadership structures found in family business
Two of the most common are owner-operator models (where ownership and control is limited to an individual or a couple) and partnership models (where multiple family members own and operate the business jointly).
While both have their strengths and weaknesses, the partnership model clearly introduces a more complex set of factors as siblings, in-laws, cousins and extended family members are directly involved.
One of our early encounters with such partnerships, regardless of size or industry, occurred where two brothers (the patriarchs of the business) were on the cusp of deciding which of their children ought to be their successors. This scenario became a clear trend over the years, whether the patriarchs were siblings, spouses or cousins.
Another scenario we have frequently observed is the decision over who, among two or more siblings or close relatives in general, ought to lead the family business. Over the years, we have encountered similar perils among automobile dealerships, home care companies, professional services firms, hoteliers, construction firms, retailers and so on.
What are the common denominators that pose significant risks to these companies, whether in performance, survival or transitioning their business to the next generation?
The possible sources of conflict at the top of the house are limitless, and each scenario requires an innovative solution. Of course, no two families are alike, no family dynamics and histories are alike, and no sets of solutions are alike.
That said, family business partnerships are at serious risk of failing or underperforming if leadership issues remain unresolved. The family unit itself is at significant risk, too.
Here are some key factors that can undermine the success of partnerships running the family business.
Lack of clear roles and responsibilities: Ambiguity about who is responsible for what can lead to overlapping duties, inefficiency and conflict. Also, family members may expect equal say or involvement, even when their expertise or contributions vary.
Succession planning challenges: The failure to plan for generational transitions can lead to power struggles or unclear leadership when the original founders step down. Also, next-generation family members may lack the skills, interest or commitment to run the business. Other issues can crop up when family members are encouraged to gain industry experience outside the family business, then they are lured back without the certainty of a specific role—as appointments to key leadership roles need to remain a competitive process.
Poor communication: Emotional dynamics can make open communication difficult, leading to misunderstandings. Unspoken expectations or unresolved conflicts from personal relationships may spill over into the business. In addition, addiction, psychological or marital problems can imperil communication among members of the family.
Conflict over vision and goals: Differences in how family members view the future of the business can cause disagreements about growth, strategy or succession planning. Also, differing personal relationships with money and financial goals can create tensions that jeopardize the business’s unified vision.
Unresolved family issues: Long-standing personal disputes, sibling rivalry or favourtism can create tension and negatively impact decision-making.
Financial disputes: Disagreements about salary, profit-sharing or reinvestment priorities can strain relationships. Perceptions of unequal effort or reward among family members can also create resentment.
Mixing business and family matters: Personal and professional boundaries can blur, leading to emotional decision-making or favourtism. Non-family employees may feel sidelined or undervalued, causing internal team dynamics to suffer.
Resistance to change: Family businesses often take traditional approaches, which can make adapting to market trends or embracing innovation more challenging. Younger generations may push for change that older members resist.
Lack of external perspectives: Over-reliance on family members may limit diverse input or expertise from outside advisors or employees. This kind of insular approach can lead to poor strategic decisions.
Legal and structural issues: Failing to formalize agreements, such as shareholder agreements or partnership contracts, can lead to disputes over ownership, decision-making or profit distribution. Tax and estate issues or unclear inheritance plans can also cause conflict.
Steps to take before family members stop talking to each other
We wish there were cookie-cutter approaches that could be readily applied to solve these dilemmas. There aren’t any, and those we can provide will sound like platitudes. Also, the longer the family waits to address these issues, generally the worse the situation becomes. Essentially, people become locked into their positions.
At the extreme, it is not uncommon for partners to stop talking to one another even while still working together. They avoid inviting one another to their homes or celebrations. Simply put, the situation can become nasty.
Certain strategies can help turn these situations around, but it is far better to follow guidelines that can minimize the likelihood that family business partnerships deteriorate in the first place. They include:
- Establishing clear roles, responsibilities and governance structures.
- Communicating openly and regularly, fostering transparency.
- Creating a shared vision for the business and documenting long-term goals.
- Allowing the next generation to freely propose ideas and share their vision for the company’s future success.
- Addressing succession planning early and inclusively.
- Implementing a structured approach to developing the skills and competencies of younger family members to help ensure they are prepared for leadership roles.
- Separating family issues from business operations by maintaining boundaries.
- Engaging external advisors with strong competencies who can help deal with personal, interpersonal and family dynamics, and who can maintain an unbiased perspective.
Embrace governance
A critical yet often overlooked component of family business partnerships is the establishment of robust governance structures. Governance serves as the backbone for resolving conflicts, making informed decisions and ensuring accountability across generations.
Here are some factors to consider:
The importance of a family constitution: This can codify shared values, vision and protocols for decision-making, succession and conflict resolution. While the process of creating such a document may initially uncover tensions, it ultimately serves as a reference point to guide the family through challenging times.
Independent boards and advisory committees: Incorporating non-family members into advisory boards or formal governance structures can provide an objective lens to evaluate business decisions. External advisors can challenge assumptions, bring diverse perspectives and help balance personal dynamics with professional imperatives.
Governance for conflict management: Predefined mechanisms for addressing disputes—such as a family council, mediation protocols or third-party arbitration—can prevent conflicts from escalating. Establishing these systems before conflicts arise is crucial to maintaining a healthy balance between family harmony and business efficiency.
Family businesses thrive when they balance the strengths of individual family members, personal relationships and sound business practices. Addressing potential pitfalls proactively can increase the chances of long-term success.
Dr. Gerald (Gerry) Pulvermacher, Ph.D., C.Psych., is an organizational psychologist who has been in practice since September of 1972. He is a dual citizen of the U.S. and Canada, is married and has two daughters and five grandchildren. His clients at Gerald Pulvermacher & Associates (GPA) are located throughout North America and can be found in many industries. Gerry does not believe in retirement, so he hasn’t transitioned his own business; he has, however, transitioned himself on several occasions. Apart from transitioning from clinical to organizational psychology in the late 1970s, he has been the managing partner of his consulting and clinical practices (PSS Consulting and Pulvermacher, Stevens & Shack), he owns or co-owned a summer day camp for children, a restaurant and real estate, been a senior partner and Global Service Line director for Deloitte Consulting, president of a Canadian change management firm and in the 1970s and early 80s developed the first group fear-of-flying programs. Gerry has also taught as part of the Queen’s University Executive MBA program and lectured at the University of Ottawa Family Business and Entrepreneurship Program. He plans to continue consulting indefinitely, helping family businesses, organizations, leaders within businesses and individuals grow and develop to be successful. Gerry does not see limits to growth and development. Contact him at gerald@gpulvermacherassociates.com.
Jael N. Itzcovitch, MA, is a family business and organizational development consultant with Gerald Pulvermacher & Associates (GPA). She holds a master’s degree in organizational psychology and a bachelor’s degree in psychology from Florida International University. She has more than 15 years of experience in human resources, executive development and organizational development. Jael leads GPA’s South Florida practice specializing in supporting family-owned enterprises through generational transitions, governance frameworks and leadership development. In addition to her family business expertise, Jael has consulted to privately held enterprises focusing on organizational development, coaching leaders, designing and implementing strategic initiatives and enhancing organization cultures that drive performance. Jael also has held leadership positions that included serving as Human Resources Director for the Icebox Group, and co-founded We Power Consulting in Argentina, guiding family-owned businesses through pivotal transitions. A passionate advocate for cross-cultural engagement, Jael draws inspiration from her international upbringing in Andorra, Argentina and the United States.
Michael McFaul, CMC, ICD.D, is a senior advisor, Global Management Consultant, withGerald Pulvermacher & Associates (GPA).Michael is an experienced global executive, with four decades at Deloitte leading large-scale transformation programs for clients across multiple industries. Following retirement in 2022, Michael served a multi-family office, providing independent, comprehensive wealth management and financial services to multiple high-net-worth families and individuals. He served as a Deloitte board member for Canada and Chile for 8 years, with key roles as chair or co-chair on numerous committees including: Governance; Leader & Talent; Strategy, Ethics and Risk; and Finance, Investments & Capital. He also served in numerous executive roles with Deloitte including Consulting Clients & Industries Leader, Canada/U.S. Consulting Collaboration Leader, Director Operations – Ontario and Quebec regions, European Practice Director – People Competency, member of European Management Committee and member of the Canadian Consulting Executive for 17 years. Michael also has developed a deep and broad experience in consulting in such areas as governance, program and performance management, leadership alignment, organization design, culture change, workforce transition and communications. Growing up in a small town in Quebec, Michael learned early on the importance of strong family values, teamwork, commitment and personal drive.
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