When your parents pay your salary

November 8, 2011, 2:43 PM UTC

By Shelley DuBois, writer-reporter

It's a family affair. Left to right: James, Elisabeth, Rupert, and Lachlan Murdoch.

FORTUNE — With smartphones at the hip and ceaseless access to the office, it’s no surprise that many workers are struggling to find balance. But for a section of the American workforce, “work” and “life” have never been separate. In fact, American corporate enterprise traces its roots back to small, family-owned businesses.

These businesses are still thriving, in some ways. Over one-fourth of businesses that responded to the 2011 U.S. Census Bureau’s Survey of Business Owners, taken in 2007, were family-owned. But despite the advantages of mixing business and genetics, there’s always that elephant in the boardroom: you have to work with your relatives.

This can be stressful. For one, “you’re going to take the work home with you because it’s your life,” says Tom Angell, a consultant with Rothstein Kass.

Family-owned businesses tend to have more complicated dynamics than their counterparts. That’s true even for the most caring, communicative, leave-it-to-Beaver-like nuclear units. Family issues are so common, in fact, that a handful of consulting firms specifically cater to family-owned businesses.

“I’m part accountant, part psychologist,” says Angell, who specializes in family-owned business consulting.

This might sound like fodder for a reality series. Indeed, it is. Back in 2010, MTV (VIA) put out a casting call for people who work in family-owned restaurants. “The bigger the family, the better,” the release said. “We’re especially interested in families who live in small towns.”

While dysfunctional family businesses might make good drama, specialized consultants aim to mitigate problems that come from the business-family crossover without necessarily opening a can of psychological worms.

“Does everybody need therapy? No. And it’s my approach to go no deeper than they need to,” says Steve McClure, a principal with the Family Business Consulting Group, a firm that specializes entirely in family-owned businesses.

Instead, consultants try to help families identify instances where they have overlooked how their personal dynamics affect work. Then consultants can work with families to come up with a plan to smooth out the bumps.

Nonetheless, family businesses are susceptible to certain troubling patterns, mostly surrounding succession. Even the mighty Murdochs have hit succession problems at News Corp (NWS). The family has had discussions with a psychologist over succession troubles, according to a December article in Vanity Fair. And on Friday, the Oppenheimer family sold its 40% stake in diamond miner De Beers to Anglo American, which some have described as part of a larger succession problem.

Across the board, the younger generation in a family-owned business tends to grow restless for change when they reach their thirties, McClure says. This can also coincide with a need for organizational changes at the company – technology advances between generations, and customers’ needs evolve.

“Differences are unavoidable between generations,” says family business consultant Ed Rosenfeld. “The senior generation generally has an interest in preserving what they’ve built and an economic incentive to protect their retirement. The younger generation feels pressure to grow the pie in a shorter time frame, or they’re not going to get the lifestyle that they want.”

People tend to get locked into their family roles, even when they enter the business. Families still remember when their relatives were screw-ups, troublemakers, or golden children, though those roles may not affect competence at work. McClure often advises a young family member who is a potential successor to leave the business for a short period of time and prove his or her prowess at another company, which can relieve tension about the person’s merit.

Merit questions surface often, he says, because of a key difference between family and business dynamics: in a family unit, the neediest person generally gets the most assistance, as opposed to the most competent person. McClure says his company urges people to use the family network, not the business network, to support needy members.

It can be tough for people to hear that advice. “They’ll understand it mentally and logically, but emotionally is where they have the trouble,” says Angell.

In fact, the best-run family-owned businesses, according to Rothstein Kass’ research, are difficult to distinguish from any other company. They tap into insight from independent advisers that serve the same purpose as a board. They make decisions that do not favor certain family members excessively, and the business portion of their lives doesn’t dissolve when there’s trouble at home.

A family doesn’t even really need to be entirely functional to run a successful business, says McClure. But it helps if they can drop all the baggage that comes with being a family when they step foot in the office.


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