Why Family Businesses Fall Apart Behind Closed Doors | Power, Legacy & Trust

Some businesses don't collapse because they run out of money. They collapse because the people inside the family stop trusting each other and nobody talks about it until the damage is already done. I'm your host, Edna White, and this is Keeping It Real On Purpose, where we stop performing, start telling the truth, and unpack what's really happening underneath the surface. Today, we're talking about the hidden emotional patterns destroying many family businesses Joining me today is Rene Sonneveld, a global Fortune 500 executive turned trusted advisor to enterprise families, elite athletes, and executives around the world. He's also the best-selling author of The Elephant in the Family Room, Managing the Complexities of Legacy Businesses. Welcome to the show. Thank you, Edna. It's a pleasure to be here. it is exciting to have you on i love the title of your book the elephant in the room i'm always talking about the elephant in the room i'm so glad you are and and it's funny the the many families or organizations i work with or teams now they talk about you know when something is a little bit uncomfortable to talk about they say they just say the elephant yes and then everybody gets real yeah because we we get often into our patterns and absolutely we tap dance around the hard issues and then people learn to say the elephant kind of as a stop word to open up the conversation yes start at least start talking about it like is anybody going to talk about the elephant in the room and then it kind of starts a little general conversation but everybody still reluctant though but it opens the door yeah it does i'm happy i called it the elephant in the room and not the bull in the room oh my god yes yes that's right that is right that's good i like that one so what's the biggest emotional pattern you see destroy leadership and decision making in a business a family family business yeah like a family business let's do that family business yeah so uh people have conversations but they don't have the real conversations people talk with each other but they don't talk real with each other the the families um very often and i call them they're great escape artists they are really smart to to to dance around the issues that need to be addressed yeah for example there's an uh somebody brings up an issue related maybe to the business or to the family or to the family governance which is hard and very quickly you see that the family members try to shift the conversation to something else maybe talk about a spreadsheet or talk about the dividends of the company or the profit or a buyer who's complicated or a creditor or a debtor that that doesn't pay or whatever they they bring back to abstract issues so people are families are very smart in in avoiding and obviously the more you avoid it the bigger the elephant becomes right yeah absolutely talking about it you take energy it shrinks and it becomes easier to talk about it why do you think they look so normal on the outside because i know i've dealt with some businesses as well and you look so great on the outside and then you go in and it's like oh what's going on here yeah and and and basically you will see that with many families that look great on the outside not only business families also non-business families because very often um we we like to you know we we like to be the the perfect facebook and instagram yeah picture type of family you know the you all see these people they're at the happiest moments and families they like to project that obviously that everything is fine and there are no problems and and then you get insight and you see there's actually a lot going on right by the way also there's a very often people do not want to recognize their problems right got it so um there's a state of denial as well and when you open the conversation and you start working in those family dynamics that's where um actually the things start you know filtering through and out of that um that that's you know part of the art of what i'm doing you you figure out what are kind of the real issues that that need to be addressed what are the pain points what are the blind spots of the family right i know a couple of businesses or let me just say one business in particular um and i was asked to go in and just like follow them and see what their days like and talk about what they could do better and i find that a lot of businesses that start they start with the love of this is my baby this is my thing And then they kind of hire and they get board members that are close to them, you know, that are really close to them because they believe in the mission. And then it's a lot of when the business does start to grow, as you said, the elephant gets bigger in the room, then all the problems start to surface and then the problems get bigger. But they don't want to let the let the people go or, you know, like, you know, penalize them because it's so emotional. you know how do people deal with that how do you come out of that you know and you know because you're you these people stick with you for years and i and i have a particular business that that they started when the business started and they were there to support them but they don't want to fire them and they're doing a horrible job how do you help in that situation yeah and that and that's and it's really hard um first of all just from a maybe a little bit of a caveat not all business are like this right i mean i come into particular situations where indeed this happens and there's so many examples of um you know the administrator that was there since uh that started the business and the administrator is 68 years old yeah he comes in the office whenever he wants sometimes at two in the afternoon he does his things he makes a mess and whatever but every time we bring it up that's get you know very defensive about this right so um you know one of the beauty beautiful things of family-owned business is if they're well run they're the most successful businesses in the world they are family-owned um but they can also be incredibly destructive um because of these emotions right so if this would be a fortune 500 or any kind of normal business could be a business around the corner a warehouse a distribution whatever business um those people that that do not grow that do not evolve and somehow get stuck um they you know they get fired right unfortunately but that happens but now there are these emotions and they're almost part of the furniture part of the family they're the trusted people in the organization and and there's another type of attachment and family-owned business very often they have that whatever luxury to think in that way of okay we're attached to this person not maybe the most effective one but i fully trust him and there's then the other thing and and just imagine there is this family they're a man wife husband and wife they they are they are working together they have a little distribution center they're sitting at night with the candlelight around the table thinking about how to make uh ends um how to make the salaries pay for the two employees they have right or or the fuel for for the trucks that they need to do the distribution and they're really in the survival mode right and and everything they do is is focused on their business and and then it gets a little bit comfortable and and and things start growing and developing and and suddenly there's space for more but these people that were with them from the beginning that that co-survived with them there's a big attachment to that there's some very big emotional ties now you get the the situation 25 years 30 years forward kids were born went to university let's just say or they started with 18 years old sweeping the floors in the in the company and and and grow the ladder and they see things like for example this guy still being there or this this this lady still being the company and being totally unsuccessful ineffective right and they start talking with that who's still the ceo of the company about it and and they don't have that same emotional attachment right and but that you know i went to the war this is this is my buddy yeah this is not about him being the best administrator or the best whatever right in the company he is part of my my my you know everything that that happened he's part of that and so that you have this conflict where you know the young and whatever the fresh and they want to move and change they see those older whatever people attached to the company and and that's really difficult or very good or where let's say there's a confusion um a friend starts working in the company and this is confusion between friendship and the business right which by the way is the same type of confusion often that exists between my son is working the company i want him to be ceo to be a ceo and he really doesn't have it yeah he doesn't have right right he doesn't have it yeah but how are you going to fire your son yeah right let me give you an example of that actually i i worked with a family where a big company actually where the son was the ceo of the company and the father he was the chairman of the board and uh his board members complained about the about the work of his son the CEO and complained a lot about that and the son he told me later this story and he told me you know one night my father called me to his office and I thought that he was going to give me a bonus and he had on his table he had two hats two baseball hats a white one and a red one and he put on the red one and he said son I'm putting on here the baseball hat as the chairman of the board right and I must tell you you're fired oh then he took off this hat put on the white hat and said son I just heard that I just noticed that you were fired from your job is there something I can do for you as a father that's good it was really hard I mean he went through some yeah some some help to to figure that out but that's the way he dealt is that right because how do you fire your son or daughter or nephew from a company yeah that's really hard that's that's traumatic like friends yeah yeah it is hard um i've heard um oprah say that if there's just an inkling of jealousy in someone that's close to you you know in your proximity get rid of them and i know i'm looking around reading about you um you talk about fear resentment envy and insecurity in the business leadership why are those emotions so dangerous when nobody addresses them if nobody addresses them because they they are present i mean first of all they're human right there's nothing new it's not that when you you know grow up in a family that owns a business it doesn't matter if it's a mom's and pop store in the corner or it's a big corporation the same thing human emotions will take place you have and there can be so many different dynamics and i i write about that and unfortunately my book got 400 pages because i couldn't stop writing um i actually wanted to write something 180 pages and then uh and actually my editors they they they took out 200 pages or so wow the the um the emotions that we all have they they they show up in weird ways and it can be let's say a brother and sister growing up in a family and the sister she was always the golden girl everything she did was perfect and the boy you know he was never good enough right and now one day they are in power in the company they took over the company and they are now equal shareholders there's a lot of reckoning that's going to happen there because this is the moment where in this case the boy the man now he's an equal level there's nobody anymore holding up that over him right right golden umbrella over over the girl for example and and you know so there's there's a lot of toxicity that happens in systems when people do not address them and it just grows and and it can be jealousy it can be ego it can be pride um you know it can be entitlement um there there there are lots of psychological dynamics that that can be very destructive like they can be like they can be in normal families and families that don't own a business right and we're just what happens they grow apart they call it so nicely you know right we have grown apart well basically it means we can't stand being in the room maybe for thanksgiving very polite eat a lot and then go away yeah so you what you're saying really i'm hearing you say is that you know whatever is in a family dynamic can actually express itself if you go into business with one another that's what that's what i'm hearing you say and it's more apt to happen in the family business versus you know um a fortune 500 business that no one's related to you know related to you in so that can even happen you know i've seen that in a lot of times in in um like local churches as well you know like small churches i've seen the father kind of put that person up and then there's like this animosity you know it's just a hot mess it's really a hot mess and you try to work over it but you can't you can't really you can't and and and exactly there's a lot of jealousy underlying power play aggressive passive passive aggressiveness and so on but the truth is the truth of the matter is that family owned businesses look at these numbers they generate about 70% of the global GDP in the United States in the world managed is generated through family owned or family controlled businesses about 70% of all People working in companies are working in family-owned or family-controlled companies globally. That's nice. So that's huge. It's a huge number. It's a gigantic number. A big part of the global economy is related to family-driven businesses. so the good news is well-managed family businesses right are much more profitable than publicly quoted companies right there's a fact statistical statistical that's very interesting wow so there's a lot going for it yeah for family businesses to to you know to make them sustainable to thrive right the truth also is that and these are you know these are quite general numbers but the the vox populi in the popular saying is that 33 percent of family owned businesses only survive the second generation and 13 percent survives the third generation so 13 percent of family businesses only gets to the third generation that let's say grandfather started it grandchildren they still manage it right only 13 percent goes over now that doesn't mean that these families all go belly up that they go bankrupt some of those companies are being sold right right that's what i was going to say they're being sold right so they become somebody else's okay okay so have you ever seen a situation i'm sorry go ahead no no please go have you ever seen situations where the next generation that inherited the money as it were were not emotionally mature enough to protect that legacy oh yeah yeah absolutely um and there's there's a lot um they are there they are and and there's also a lot of pressure you know some some next generation they're simply not interested in in working the family business they want to do be something else they want to be a doctor or they want to be a musician or they want to be an artist or you know or someday it's not their dream they want to do nothing they want to yeah they want the the check each year i mean this everything uh and some of also if if this is a larger family system it's not that you only work for the shareholders let's say you become the ceo of a family-owned company it doesn't have to be a big one you but you're the owner or now you're the ceo but your brothers sisters your cousins they're all shareholders you're not working for a bunch of anonymous shareholders you're working for family members right if you make major mistakes it's not only that the company's making less money or maybe at risk the entire family system is at risk so the pressure that you feel is quite some bigger let's say if you of course when you're the ceo of a publicly quoted company the pressure's high but it's not that every shareholder calls you hey what's going on right right they don't have access to you well in family-owned businesses have access yeah you have access that's right wow what happens when the family roles in the business roles become confused in those situations all the time all the time that happens and one of the first things we need to clarify so in you and this is a very famous um a model which was developed by john davis and from harvard university and and some of his colleagues and it's a three circle model and just picture three circles okay one circle is called family right one circle is called executives in the company okay and one circle is called shareholders okay okay now in the family-owned businesses there are places where these circles they converge yeah so some people can be family members and work in the company they're not shareholders some people are shareholders but they don't work in the family yeah right and and then there are the executives they are neither shareholders nor family members right now when you're a family member but you're not a shareholder you're not an executive but you have the name sometimes people get confused and they think they're entitled too and they call the HR manager in the company say hey i have a buddy he needs a job talk with him right right or somebody says i would like my my son or my daughter to be working management or in marketing or in HR they need a job or you are a shareholder and you are not working the company you start giving orders you can't do that you cannot say and as a shareholder you can you know nominate the board members and you can vote for um for the board members so that's where a lot of confusion exists when those people do not understand in which circle they are and what that means it's one of the first things we talk about yeah and they're supposed they're really supposed to talk about those things in the beginning right and somehow it gets to you and it's at the end and it's not the end it's not the beginning sometimes it's the end of the beginning sometimes the beginning of the end you know yeah it's one of those too because you know you really should talk about them you know and i have a question for you because i never believed in partnerships and a lot of partnerships that i've seen go together come you know they work and one is always not doing well and then something happens and the partnership dissolves and even i had i went against my own judgment and got into partnership and um i thought i explained like explained and i wrote down and i shared that you know this is what you do this is what i do and i thought i had said that and it was like uh yeah no and it started to be everything was on me how do you you know i i may i you know i i lost a friend because of that because i was standing up for myself and saying yeah i'm doing more work than you are and I don't even have an office and I'm I was in real estate so I had to manage two offices with like 15 agents and he was like the benefactor it was a second partner but it was not just money I was like you have to go out you do this this and this and I do this this and this and well keep things running and um it wasn't happening that way it was I was doing all the work and he was in his office like with his feet up like cracking up with his friends and i'm like hey this has got to stop but i lost a friend because he couldn't understand what do you mean what do you mean i'm in the background and i'm you know i'm putting money for this and putting money for that i said that doesn't equal what i'm doing i'm not equal we got to sit down and talk about it and he got really irate so in situations like that you do lose partners and and business owners when i don't know what that is i don't know what that that thought was in his head that he didn't have to do anything maybe it was the line you know the lines coming together you know friendship you know i could get away with this or whatever maybe that's what it is i don't know what do you think it is um well first of all, I'm sorry that that you had to go through that, it can only have been, it must have been hard for you, difficult to to do that, lose a friend, um, similar things have happened to me as well, unfortunately, um, but I think that sometimes people, they have a great idea, it's the idea, right, right and there's a lot of wishful thinking but they do not really have a clarity of purpose, they didn't set in the beginning their expectations from each other, yeah, we just start in the survival mode of a new starting business, yeah, then it becomes something and there's just in the business no time for aligning, right, yeah, what needs to be aligned and one moment you wake up and the the disalignment is so big, yeah, and I, you're right, I see that, I see that as you're talking about it, there was it was that I was doing all this, we're doing two different modes and we didn't get to sit down on like a regular basis and let's align, let's see if we're going the same way, you know what is, what are you doing, we weren't doing that, I see it now, you weren't doing that, yeah, you're right, but it's hard, it's hard to confront reality, oh yeah, wake up one morning and say, look, in this way it's not working, yeah and to have that conversation, I can only imagine that it must have been difficult for you and furthermore, now you put a lot of energy in something and that conversation might be putting at risk, everything you built, yeah, absolutely, it put it at risk we tried to evade it, right, yes, it sure did put, put it in big jeopardy and it was it was i mean i i built two offices there was 15 in one and 10 in the other and just to have that conversation was so very difficult and it was like it went crazy this went crazy we were screaming at each other and i'm like oh my gosh this is not the way it's supposed to go and it was just yeah we parted ways and offices and everything were just dispersed it was just not good so yeah i i like that part that you said to align and that just means maybe setting you know like i thought that i said that but again life gets in the way business and we were i was doing this he was doing this and then we never got back to talk about what does it look like for you what does it look like for me what are we doing as a whole as a partnership it didn't look like we didn't have those conversations yeah and and there's uh sometimes also this fear involved right absolutely yeah avoidance yeah because i knew he was kind of he's he was he was he was um i was a scorpio he was a scorpio so i know he's a little bit more eruptive than i was like he he just like he he's more like spontaneous to erupt look at the night like i would take my time but you know once it gets started it's over so i was like yeah okay if you're if you're a scorpion i don't want to be your frog yeah so yeah it was like yeah i knew he was going to be very confrontational with me on that one so yeah and with you know i i say it because we're friends for like 15 20 years yeah so i don't believe in them i honestly don't believe in them at all you know well there's this gotta be famous putting it's gotta be in stone it's almost gonna be in stone i'm so afraid of them what happens is um you know in this case you had also three circles you had you had friendship you had the work you had the shareholding and there was just no clear boundaries between friendship yep absolutely only works if there's a clear boundary here we are friends and here we are business partners yes and absolutely different things and that's separated in the room that's it If we can fight in the business and then afterwards go to drink beer as friends, amazing, right? Yes, that's it right there. You answered the elephant in the room. That's exactly what it is that we don't talk about. The big thing there is, the big word there is, is trust. I worked with a family that came just up to me. i worked with a family where um two partners they were fighting partners business partners and family brothers two brothers at work they were shouting at each other oh wow and smashing the door walking out of meetings yeah yeah yeah and in the evening frequently they will drive back to get in the same car to the house not because they didn't each have a car yeah and so they get in the car they learn to trust each other through years of working together that they would always come back to the room yeah they disagreed about many things right right and that's okay but they always came back to the room yes and that's it that's important to say too it's that it's okay to disagree i think us as humans don't want to do that you know we don't want to get into the conflict and we don't you know we don't everybody doesn't have to agree with us But we do have to have a common ground, you know, around business. But, you know, I always say if it feels emotional and you get emotional about it, it is emotional. It has nothing to do with business. It has nothing to do with business. If you say, I feel that, I feel that this should be, you're right. It's your feelings. Take that out of the way. Let's deal with facts when it comes to business. And that's how I am, you know, because, you know, I've been around a long time. and I hear people say that I feel like we shouldn't do this and then it becomes a mess you know it becomes like okay this is a whole big mess right here um because I felt that way when I thought it was gonna be okay thought thoughts and feelings no good no good you know absolutely yes yes so you let us know about the the elephant in the room now because we're short in time we're going to go to do the flash round and so this is for our audience audience are you guys ready this is for you and he's going to give you some insight with oh he's going to answer questions quickly, there's five, there's five questions, answer quickly, give them the best information you could possibly give them and we're going to go from there, you got it, okay shoot, number one: what destroys more families family businesses bad strategy or broken trust broken trust. number two: what's one emotional pattern leaders refuse to admit they struggle with pride, oh that's a good one. oh, number three: what's the biggest mistake parents make when preparing the next generation to take over, they don't, they don't prepare them. oh wow, that's a good one. what's number four: what's one sign a family business is heading toward conflict even if profits look good, this is a very good one, there's so many angles to that, um, when the family loses their north star as a family, they lose their spiritual and their purpose connection, right their faith here, that's good and last one: what's one truth every entrepreneur needs to understand about legacy before it's too late they need to understand that the next generation should not be a hostage of the old legacy that each generation creates their own legacy, yeah, and they need to have the freedom, yes, to create their own legacy so that's great, the family legacy, the values the next generation needs to be able to shape their own legacy, yes and what would you say to someone right now who's listening who's probably in that situation where the family's at odds about something what would you tell them to do the first step to do to start to you know i know one would be to contact you that's that's for sure but what would the other thing be for them to start to come together or at least start talking about the elephant in the room stop stop blaming start talking people need to feel safe if there's no safety people cannot be authentic and if there's authenticity then people start acting and and it all becomes very uncomfortable and and and people start avoiding that's it that's sure renee really thank you for this thank you that was really really good information one of our first um family-owned businesses um a person that does this because you yeah you do the strategy all the time it's amazing i'm getting to meet so many wonderful people like yourself and you specialize in this family business, the elephant in the family business. I love it, love it, love it, love it. Audience, you are hearing today, what you're hearing today isn't just about family business. This shows up in relationships, it shows up in partnerships, in leadership, as Renee has said. It shows up in entrepreneurs trying to grow while carrying unresolved emotional patterns because people don't just bring skills into business they bring their wounds their fears their identity issues their control issues and their survival today we want you to listen so don't just be talking about it don't do that we want you to do something about it in the bottom of this video or if you're hearing this video look in the bottom up you'll find renee's information so we want you to be about it if you have any of these issues look for renee's information and listen he's so unique i'm sure you're going to find him even if you google it all right so we don't want you to leave in struggles we want you to get out of what you're going through so hit the link in the bio or below this video right now we want to say goodbye for now. This is Edna White and my esteemed guest, Rene, with his specialty in the elephant in the family business. I love it. We're going to say goodbye for now. Thank you, Edna.