Family businesses often fall short of their potential and even fail to perpetuate because blood is sometimes too thick for the benefit of the business. In family-run agencies, rewards are often given to the wrong people and when family members harbor feelings of jealousy and resentment, problems can easily fester and eventually destroy the business.

Most of these debilitating issues grow from a disparity of talent. One family member has inherently more talent than another, or one family member simply has no talent for their position. I occasionally work with agencies in which all the family members bring unique and complementary talents. Most often, though, the difference in abilities between family members fosters numerous problems which collectively hinder the agency's true potential.It is important to note that the family members in these situations are not bad people. Emotions and expectations simply run deep among family members. If poor performance is the issue, most likely the individual who is underperforming is a great person. Perhaps they are just not cut out for their position or they are not suited for the agency or the industry. Trying to fit a square peg into a round hole is a common practice in family-run businesses.Although mothers and daughters are occasional players in the unique dynamics of family-run agencies, the most devastating issues usually revolve around fathers and sons. The most common father/son situations I encounter fall into two broad categories (with an endless array of variations in each category): either the son's sales/entrepreneurial abilities are less than the father's, or the son's abilities are greater than the father's.Poor performing sonWhat should a father do if a son does not have adequate sales or management skills? Fire his own son? The situation is made immensely more complicated when more than one son is involved, especially if one son's abilities exceeds the other's. Should the father treat one child better than the other? Should the father pay one a lot more than the other? Should the father send one out on the streets to find a new job, a new industry, a new life?Because resolving such a situation is very painful, the typical result is the son is overpaid for his poor results. This in turn creates resentment between partners, producers and staff. The agency's productivity, morale and profitability inevitably suffer. An agency can limp along with a poor performing son for many years, but with such a handicap, the agency's overall performance and value will be very limited.Many times the father does not realize the negative impact of the poor performing son until he faces retirement. Then the harsh reality sets in and the father realizes he cannot internally perpetuate his agency. Instead, the agency must be sold at a price much lower than the father's expectation because of years of poor performance.The legacy of the poor performing son can live on even after the agency is sold. If the father fears that the son cannot adequately make a living on his own, or if the father feels guilty because he could not find a way to give his son the agency, he is likely to make sure his son continues to be unjustly rewarded by the new owners. As you can imagine, this does not usually set well with other siblings or key employees.Sometimes the shock of retirement, not being able to perpetuate internally or getting a low price for the agency causes the father to switch his position 180 degrees. When the father realizes the agency's sale represents his entire retirement fund, he may decide it is time to let his son start earning his deserved compensation, which generally equates to a giant pay cut. After years of overcompensation, the son has grown to expect a reward in excess of his ability. Or, the son has grown to believe his ability matched his excessive reward. Either way, the consequences usually include a very angry son (and an even angrier spouse).Exceptional performing sonI have been surprised by how often I see this situation occur, and it is usually the worst of the two situations. The most devastating consequences usually do not occur until the father prepares to retire.When the son proves himself to be an excellent producer before the father leaves the agency, the father will very often demand, or try to demand, an especially high price upon retirement. Whether it is an excessive income, a very high price for the agency, or some other method, the son is usually left with a high debt load, significant resentment, and an ever-lingering question about why the father would take advantage of him.I have not found very many fathers who set out to take advantage of their sons in these situations. But upon retirement, they find themselves with a real need for more retirement money, or they are insecure about what they have achieved, or they fear their legacy will be erased by the achievements of their son. The father is not sure how to handle the fact his son is a better salesman than he is, so sometimes the father concludes his son owes him something extra for having gotten such a great opportunity for success.While the father may have provided his son with a true opportunity, the father, if he is thinking rationally, will consider that he has probably already made a lot of money off his son's success. The son's big book of business has been part of the agency for years, and is usually part of the agency's sales price, so the father is already getting paid twice for the son's success. Wanting more is pushing the limit of the relationship.What's a father to do?The best method for a family agency to optimize its operations and perpetuate internally is to run the business as a business. This sounds simple, but the execution is difficult. The agency must run its day-to-day operations, delegate responsibilities and determine compensation as a business, not a family. This means real rules and procedures that everyone follows. This means setting rewards according to achievement, not relationship. The agency must address issues early and every employee should be filling a role that fits them best.The sooner a family-run agency can change its mind set and its culture to run like a business, the better. Once unrealistic expectations are set, they are difficult to break. However, it is never too late for an agency that is determined to improve its operations and secure a stronger future. Such a change requires strong leadership and superior communication. It requires taking an objective look at everyone's performance and possibly making drastic changes. With careful consideration, those changes will likely lead to greater long-term success for every employee, every family member and the agency.I believe regular agency reviews–or even better, regular valuations by an outside third party–are an important step toward running an agency like a business. An objective review can provide valuable insight into the agency's situation and opportunities for improvement. The reviewer can identify issues the family may prefer to leave hidden and determine whether compensation is fair. The review can also prevent the owner and heirs from developing unrealistic expectations of agency value.The limitations imposed by allowing family ties to rein in the workplace can suffocate an agency and its employees. The benefits of leaving those ties outside the office can rejuvenate the agency and even family relations outside the agency. Check your family ties and emotions at the office door and see what a difference it can make.Chris Burand is president of Burand & Associates LLC, an agency consulting firm. Readers may contact Chris at 719-485-3868, or by e-mail at [email protected].