Family Business Challenge: 3 Issue You Can't Ignore

Reflecting on popular toy brands throughout the years, nothing stands out quite like LEGO. Starting from Ole Kirk Christiansen's Danish woodworking business, today LEGO is one of the world’s largest and most profitable toy companies.

With so much success, it's easy to forget the business was almost bankrupt at one point. LEGO was $ 800 million in debt in 2003.

The most significant change in the company is that they had their first-ever CEO who is not a descendant of the Kirk Kristiansen family. Jorgen Vig Knudstorp was the guy who turned a dumpster fire of a company into the multibillion-dollar corporation that it is today.

All businesses will face challenges and suffer through some hard times to achieve success, LEGO is no exception. However, a family business has additional problems to overcome because of the interpersonal relationships they already have with family members. 

The more interconnected a family is, and especially within a family business where assets are shared, the greater the potential for these issues to cause conflict.

There are at least 3 crucial issues in a family business that cannot be ignored.

What are the three problems? What should a family business practitioner do to deal with it? Find the answer in the article below

1. Entitlement

The word "entitlement" refers to family members who claim compensation in excess of their contributions and display little or no regard for those who helped them achieve financial success in the first place.

“Born on third, but he thinks he hit a triple!”

Familiar with this phrase? It often conjures up stereotypes of spoiled, lazy, demanding next-generation brats and trust fund kids. Individuals who want to be given something for nothing and one day take over the family empire while having little or no experience with its day-to-day operations.

When that person is part of a family company, his or her sense of entitlement can cause havoc. Perhaps that individual believes they are entitled to a place in the C-suite that they have not won.

If not resolved, Entitlement directly impacts relationships in business and the family, creating conflicts that can contribute to the demise of the company.

Read: Ways to Manage Conflict in a Family Business

How to Deal with Entitlement

Is it possible for business owners to fix their family members' sense of entitlement?

It is possible but it entails firm leadership from the company's or senior generation leaders. They must make a firm commitment to strictly adhere to corporate governance, which must be practiced by all family members, including the next generation. This will allow the company to retain its professionalism while still allowing it to grow.

The sense of privilege will be removed by implementing governance and best practices. Creating a family charter/constitution, which explicitly outlines how and when a family member can advance within the company, is one successful way to enforce transparency.

In the end, next-generation family member-employees must understand and realize that their way into and through the business should always be based on merit and never through their birthright.

2. Sibling Rivalry

Competition between siblings is the most common term with children for the attention of their parents. But this competition can continue into adulthood, and it can destroy families and damage businesses.

When rivaling siblings are actively involved in the family business it is often either emotional or strategic and to find solutions to the rivalry it is first important to determine the underlying causes.

Emotional Rivalry

A common example of emotional rivalry that I have seen is where siblings compete for their parent’s approval or recognition

And as the siblings compete with one another, they are not working together to further the interests of the business as a whole. They will deliberately avoid collaborating in order to demonstrate that their success is solely theirs.

In situations like these, working on the parent-child relationship rather than the sibling relationship is the best option. This might mean formalizing recognition and reward to remove any potential for favoritism or its perception. 

It may also imply putting in place a condition that family members work outside of the family business before joining.

Read: Becoming an Effective Executive Member in a Family Business

Strategic Rivalry

Siblings with opposing values and business styles, as well as different attitudes toward risk, can lead to strategic rivalry in family businesses.

While such differences may not matter in their personal lives when working together in the family business and with their livelihoods, these differences can present problems. 

To deal with strategic rivalry is found in solid business and strategic planning. Creating a sound business strategy and sticking to it can help to prevent strategic course disputes.

3. Employing spouses

In any family business, “outsiders” may inevitably be introduced into the family at some stage and could be considered for jobs within the family business.

Job results within the company can be positive when a partner is highly skilled for the job, performance-driven, committed, and accountable.

Personal relationship problems that a couple may have at home or with other family members outside of work, on the other hand, have the ability to spill over into work life and vice versa.

This can have a negative impact on all involved, blurring the boundaries between personal and professional life, as well as family life, and creating significant tension that could jeopardize the organization's survival. When you consider that nearly half of all marriages end in divorce, the potential for problems down the road is huge.

If partners are to be invited, detailed rules, jobs and benefits policies, written codes of conduct, and disciplinary and dispute resolution procedures must all be enforced and followed by all parties concerned.

Agreements establishing what will happen in the case of a divorce or departure from the company should be applied in addition to these organizational policies. Although these interventions will never be able to completely eradicate conflict, they will aid in the mediation and management of it.

Read: Managing a Family-Owned Business - Case Study Of Google's Project Oxygen


Business is never free from problems, especially the uniqueness of the family business will add several challenges in dealing with business problems.

A sense of excess ownership, competition between siblings, and making a partner a part of the business have the potential to cause division. If not handled properly, the three of them can put the company's business on the brink of collapse even before the third generation.

Business owners are required to be smart in seeing the situation and condition of the family in the company and taking strategic steps to overcome potential conflicts that will arise.

For more information on family business issues and how to deal with them, click this link to join the Indonesian Family Business Community

The Indonesian family business community consists of dozens of family business practitioners whose mission is to develop their business for more than 3 generations and break the curse of 3 generations in family business.

To get more insights about family business issues and how to face them, click this link to join the Indonesian Family Business Community

The Indonesian family business community consists of dozens of family business practitioners who have a mission to develop their business for more than 3 generations and break the curse of 3 generations in the family business.

Continue reading

Business Newsletter

Get great curated articles every week.

Curated articles on strategy, guides and tips on how to optimize the suitable technology to grow your business after this pandemic
No spam!

Grow your business rapidly with a streamlined operation.