Family Businesses Aren't Dysfunctional. They're Disastrous

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Full Episode Transcript:

Loren Feldman:
Welcome, Cathy and Jay. It’s great to have you here. Maybe we could start, Cathy, with you telling us a little about your own experience in a family business.

Cathy Carroll:
I’d be happy to. I actually grew up in a family business. My grandfather was the original entrepreneur in our family. And, to be honest, there was a lot of drama in my father’s generation. So when I graduated from school, I went corporate for 20 years. I started as an actuary, got an MBA, spent 12 years in the travel industry.

Loren Feldman:
Wait, I’m sorry, I’ve gotta stop you. Was that a deliberate decision to get as far away from the family business as possible? Is that what you’re telling us?

Cathy Carroll:
Yes, Loren, that is exactly what I’m telling you.

Loren Feldman:
I wanted to make sure.

Cathy Carroll:
Yes, you are dang right. So anyway, in 2009, I was a mid-level executive at United Airlines. And sort of like The Godfather, my father sucked me back into our family business. And I was really reticent about doing it. I had some concerns at a professional level. I had some concerns at a personal level. But net-net, I decided to give it a shot. My siblings and my mother were supportive. And it was a really interesting experience, to say the least. That’s how I got in.

Loren Feldman:
Tell us a little bit of how it went.

Cathy Carroll:
So my father and I are opposites at almost every level. If he’s about privacy, I’m about transparency. If he’s about disruption, I’m about calming. If he’s about raising your voice, I’m about whispering. We are sort of on the opposite ends of everything.

So as you can imagine, the tension that we experienced when we worked together was pretty real. And of course, at the time, I thought I was absolutely right, and he was absolutely wrong. And I was bringing in the countervailing energy that was needed in order to make the business function very, very well. My father is really strong at marketing. I was really strong at finance and operations. And so we just butted heads throughout the entire three years that we worked together.

Loren Feldman:
Cathy, can I stop you for one second? Could you tell us: He brought you in because he felt he really needed your help, right? And he pretty much gave you the keys to the business. And you kind of turned it around, if I’m remembering your book correctly. Am I right?

Cathy Carroll:
You are right. Yeah, he needed some professional leadership in the business. So a little bit of background about the business: It’s a rodeo-equipment manufacturing business. We make ropes and saddles and training equipment for team ropers, which is one of the eight competitive rodeo sports. And my father got into it shortly after my parents divorced and everyone in our hometown sided with my mom. So my father kind of reinvented himself as not the gentleman country club golfer, but really more the cowboy.

And fast forward a few years, his new close cowboy friends were running the businesses and super-talented, very bright people, but didn’t have formal business training and the businesses weren’t thriving. So he looked around and said, “I need to bring in a professional manager,” and decided to bring me in. Sort of a side story that I don’t mention in the book is that he hired a recruiter to find a professional leader. The recruiter ended up hiring me, and my father paid the recruiter $75,000 to hire his daughter. [Laughter]

Jay Goltz:
God bless those recruiters. How old is your father, at this point during the story, when he brought you in?

Cathy Carroll:
I would put him in his mid-70s at that time.

Jay Goltz:
Okay, so there was clearly also a succession thing that he had a problem with. It wasn’t just he needed professional help. Also, he’s in his mid-70s. He knew that he needed to do something for succession.

Cathy Carroll:
He did. Yeah, he did. It’s a good point. So that’s how I joined the business. And then, Loren, remind me of the question that you asked, because I think I got off track.

Loren Feldman:
Well, I was asking you about why you were brought in, and the business was struggling a little bit. You straightened things out, and it started performing much better. But then you ran into a problem with your father after that.

Cathy Carroll:
Yeah, I mean, there had always been tension in the relationship. But what really started to get south is when we had done a series of strategic planning sessions, and he was involved in every strategic plan and bought into what we were doing. We were executing on the plan. And suddenly, the general manager, who reported to me, called me and said, “You know, your father just told me to do the 180-degree opposite of what we= decided in the strategic plan.” And I said, “Wait, what?” And so I tried to sort it out.

And then another couple of weeks would go by, and the same thing. A different general manager would say, “You know, your father’s telling me to do the opposite of what we had all agreed to do.” And this kept happening, week after week. So after a few months, I said, “I think it’s time to talk to my father.” I got on his calendar. We actually met, and I said, “Hey, you’ve been talking about wanting to spend more time golfing, more time with your wife”—my parents had divorced, obviously, and he’d remarried—“and I’d like to help make that happen. Let’s talk about what success looks like. And then you can hold me accountable to results.”

And he said, “Are you asking to be the CEO?” My title was president and chief operating officer—and I said, “No, no, my title doesn’t matter. I just think we’re confusing the team, because we’re speaking out of two leadership mouths. And we need to really align with one strategy to support the execution.” And he said, “Absolutely not. I am the leader of this business, and everybody needs to know it.”

And that’s when I realized there was no room for me anymore. And I stepped out of the business, which was soul-crushing, to be honest, because I had really built an identity around being the family hero. You know, my siblings were really keen on me leading the business—most of them, at least—because they saw their inheritance slipping away. And they felt confident I had the skills to help support a more productive outcome in the family business. And it turns out the turnaround that we put in place was successful, but not from my father’s perspective. My father, I think, what was far more important to him than profits was having a relationship with his friends.

And I think what happened was two things. First, his friends started to call me a lot more than they called him. They were getting the leadership and the support that they needed, so they really didn’t contact him. And that challenged his relevance and his identity. And I think it triggered the memory of when he got divorced, and everyone in our hometown sided with my mom in the divorce. And this time, all of his friends were siding with his daughter. And that was too much for him to bear. Now, whether that’s actually true or not, I don’t know. It might have been a sense that he felt. I don’t think it was true. I think he still has great relationships with those folks.

But then the other thing that took place was related to me. Because when I was leading the business, my mindset was: I need to lead this despite my father to make it successful, even though he’s going to do everything to mess it up. So every time the phone rang, or an email came in, my mindset was: What does he need this time? Which is really not a very good partnership mindset with the CEO and the full owner of the business. So my ego was out front. I was in my own way. And it actually took me many years after I left the business to get to be able to see that.

Loren Feldman:
How did the business do after you left?

Cathy Carroll:
Well, Loren, that’s a good question. My father terminated every single person who I hired. And the business kind of slipped back to where it was before, sort of bumbling along. Some better years, some worse years, but really not thriving the way it had the potential to thrive.

Jay Goltz:
Does it still exist?

Cathy Carrol
It does. It does, and I’ll be honest. I don’t know much about it these days for one important reason: My father is actually suffering from dementia, and so he doesn’t have the cognitive skills to lead the business. He doesn’t have the cognitive skills to communicate that about business. It’s advanced enough that I don’t think he even remembers that he owns them. I mean, occasionally he’ll remember me when his wife says, “Well, look who’s here. It’s your daughter, Catherine.” And then he’ll say, “Hello, Catherine.” And then he’ll encourage me to talk to his wife. It’s a pretty advanced stage of dementia, so he doesn’t provide us any information.

Loren Feldman:
So, I guess, two questions: One, what did you take from this experience? What do you think the lessons are? And two, how did you make the leap from that to being a coach for family businesses?

Cathy Carroll:
So first question, gosh, I learned so much that it’s even hard to say in a simple podcast [episode]. At its root, I think I learned that family business leadership is double-black-diamond hard compared to leadership in a corporation without family members. And it’s hard because all of my childhood nonsense was in the way. You know, I was in my mid-40s at the time when I was leading the business, and all my childhood injuries were just as alive then as they were when I felt them in the first place when I was a kid. So I think it creates an incredibly emotionally complex dynamic.

And when you think about family business, you’re really crossing two of the most emotional things on the planet: love and money. And when you cross love and money, you’re just gonna get sparks, you’re gonna get a ton of emotion. And neuroscience shows that when we’re flooded with emotion, our executive skills really diminish. We don’t have the same capacities to think, in creative, innovative ways when our brains are flooding with cortisol and adrenaline. And I think that happens quite often in a family business.

Now, there are some family businesses that don’t suffer all those challenges, but I want to meet who those people are. Most of the ones that I’m familiar with really face a lot of the challenges. I think another thing that I learned was how I lived in a story of being innocent and pure-hearted and well-intentioned. And I still think that I am, but the reality is, my behavior didn’t line up with my self-image. And it’s so common for us to live in these innocent-lamb stories about ourselves when our behavior doesn’t actually demonstrate that. And that took me a long time and a lot of humility and soul-searching to acknowledge and recognize. So those are probably two of the biggest reasons. And probably the perfect segue into why I got into this work.

When I left my father’s business, I had this newfound confidence that I could lead. And that was really exciting. I had always envisioned myself as a good number two, but not as a leader. But in effect, even though my father was CEO, I was really running the show. And I had this really genuine self-confidence that I could lead that I didn’t have before. So at first, I looked for a business to buy, but it was shortly after the financial crisis, and there was nothing really good out there. And eventually, all those paths kind of dried up. And I said, “What do I want to be when I grow up?” And I said, “I think I want to be an executive coach,” but I didn’t really know what that was.

So I applied to Georgetown University, to their leadership coaching training program, and I’m so grateful to have been accepted, because it completely changed my world. And I learned that coaching is not at all what I thought it was. I thought I’d get to tell people how to lead: “Just do it the way I did it.” That is not coaching. Coaches don’t have all the right answers. Coaches have all the right questions, which is a very different way to support the development of leaders.

Loren Feldman:
That’s true of podcast hosts, too.

Cathy Carroll:
Is it? That’s a great point, Loren, yeah. Great podcast hosts have great questions. I also learned that I needed a coach when I was working for my father. And I think my life could have been different if I’d had a coach. I think if my father had had a coach—honestly, I’m not sure he’s coachable. But even if my grandfather, two generations ago, had had a coach before the coaching profession even existed, we could have had a really different life outcome for our family. So I started to see the value of coaching, the impact it could have over generations. And I looked at my life, and I said, “Oh my gosh, this is my calling. This is what I meant to do.” And so I opened up my practice on July 1 of 2013. That was 11 years and two days ago, and I’ve never looked back.

Loren Feldman:
Jay, have you ever thought about hiring a coach?

Jay Goltz:
No. Well, yes and no. The reason that Cathy’s on the podcast is I had reached out to someone I knew who was involved with the university in the neighborhood and said, “You know what, I wouldn’t mind talking to somebody who gets involved with family business.” And they sent me to her. So I did, in fact, talk to her about the whole family business, succession-planning thing, which is the crux of what we’re going to talk about today. She’s giving you the perspective of being the kid and walking into the family business. And I have the opposite perspective of being the business owner and having the benefit—if that’s the right word—of looking at, I’d say, 10 other people I’ve known in business over the years and how did that whole family transition thing work out? And it ain’t pretty.

I only have one story, honest to God. I only know one person who took over the family business. It wasn’t from his father. It was from his grandfather, and it’s worked out beautifully. He did have some issues with his brother, but they worked it out. But I have six other examples of people who I’ve known well who—family disaster, nothing less than family disaster. Not talking to the brother. Not talking to the father. In one case, suing the parents, suing the father and the brother. So, it’s fraught with danger. And that’s what I want to talk about today, because Cathy obviously has more perspective than I have, because she’s dealt with a lot of businesses. So, I want to just see what the options are out there.

Loren Feldman:
Well, in fact, one of the things that I really liked about your book, Cathy, is that you do have a lot of great examples—sadly, as Jay suggested—of family-business dysfunction. As a coach, you’ve obviously seen inside a ton of family businesses. Can you connect the dots for us a little bit? Is there one main typical problem that you see over and over again? Are there lots of different problems? How do you think about that?

Cathy Carroll:
In my experience, there are a lot of different problems. But there are some themes that emerge. One of the most common themes—and this isn’t going to surprise anyone who’s listening—is how hard it is to actually step out of the leadership role. It’s a real challenge to transition a business that has become a part of who you are to your children, or your nieces and nephews, or to anyone else. Because you’re giving up your identity.

And anytime someone makes a decision that’s different from how you would have done it, it feels like a rejection and a repudiation of your leadership, which can be really hard on the leader and the founder—particularly the founder. But regardless of the generation, anytime you have a really strong identity attachment to the business, that letting go is brutal. Think about it from a trapeze. You’re swinging on a trapeze. You’re having a lot of fun. And then somebody’s asking you to let go and grab the next trapeze. But there’s no bar in front of you. There’s no trapeze bar to grab onto. So you’re like grabbing at air, going, “Wait a minute. What’s going on?” And you feel like you’re falling. And hopefully, you fall into a net that’s gonna help you.

But it can be a really fraught time. Because quite often, the leading generation has a beautiful image of transferring the business to their children, and it’s really this romantic ideal. But when it comes to the rubber hitting the road, that transition is really hard. And so instead of thinking about it as passing a baton from one generation to the next, which is an event that’s like a one-time moment, it can be helpful to think about it as a transition over time, which creates the conditions for the rising generation to grow into and build the capacity to take on the responsibilities of leadership, and for the leading generation to find their purpose beyond their role as leader of the business.

Jay Goltz:
Okay, now, that’s a perfect segue. I’m gonna give you the complete other perspective of being a business owner. I have concluded, after looking at lots of businesses and being in business groups with businesses, that there’s three problems that are very common, which is why I think you’d agree with this number. You’ve heard 80 percent of businesses don’t get to the second generation. That seems to be true, right?

Cathy Carroll:
That data has been debunked, but let’s go with it anyway.

Jay Goltz:
Okay, more or less. It’s not 50 percent. It’s a large percentage of businesses. If it’s not 80, it’s certainly not 50. So whatever it is, here’s my observation. There’s three problems here: Number one, the kid is not necessarily wired to take over the business. Maybe they’d be a wonderful musician, a wonderful school teacher, a wonderful lawyer, doctor, stockbroker. They just don’t have the innate skills or mindset or stomach to run the business. And it’s just the way it is. A large part of entrepreneurship, I believe, is genetics. And some people simply don’t have the stomach for it. So that’s the first problem.

The second problem is, Loren, you said dysfunctional. That’s not even close. It’s not dysfunctional. It’s disastrous. I never understood, and now I do. The damage that can be done by bringing your kid in with long-term employees who have given their heart and soul to your company is far more than eye-rolling and nonsense. It could be super serious. Key people could leave. It could be throwing a monkey wrench into the engine. And then lastly, I don’t know that you’re doing your kid a favor. Maybe you should find something, maybe help them ease into another profession or something. But like, you think you’re doing them a favor, and maybe you’re not.

So this is very tricky. And you spend your entire career doing business, and let’s say it’s like playing basketball. You’ve got your team. And then all of a sudden, you’re playing basketball, except you’re wearing rollerblades now. So now while you’re playing basketball, you have to worry about falling and cracking your head open. That’s kind of what it’s like. You’re gonna go from all business to now, all of a sudden, you’re not bringing one person in—there’s a fallacy. You’re bringing in a lot of people. Now, you’re bringing in the kid, the kid’s mother or father—meaning your spouse, or your ex-spouse—maybe the spouse of your kid.

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