For most businesses, their value is based on its equity which is usually determined by the value of their assets minus their liabilities. A simple PnL report allows many business owners to quantify what their company is worth… in dollars. And this typically makes sense due to the fact that the typical sole purpose of running a business is to ensure that it brings in enough revenue to grow or sustain itself, its owners and its employees.
But family businesses beat to a somewhat different drum. These businesses know that financial equity is only part of the equation. The other part—and possibly a more important part—is a different form of equity altogether. Emotional equity.
A family business has value that aligns with their revenue stream, but because the company is run primarily by relatives, the emotional health and strength of the family is priority. If the company wants to grow in financial equity, their emotional equity is pivotal.
I have yet to meet a family business owner who doesn’t desire to maintain strong relationships with their relatives—especially those who are a part of the business. But desire doesn’t always align with reality, unfortunately. And, if you are a part of a family, you know how challenging it may be to get everyone around a Thanksgiving table once a year to get along. Imagine if you trade that table for a conference table. You guessed it; maintaining strong relationships within a family business can be downright challenging.
Shop Talk is Sometimes Welcome
Part of building emotional equity in a family business is realizing that life happens within the business and outside of it. In fact, a struggle many family businesses face is the attempt to try to live by the “no shop talk at the dinner table” rule. Outside of a family business (and possibly within some) this rule is a great addition to the bowl all members are required to put their cell phones in prior to a meal. The goal here is to ensure that some time can be intentionally left for just maintaining relationships.
Emotional equity, however, is more than setting boundaries on when shop talk can happen. It’s about reframing how a family business can actually strengthen a family bond and, in return, strong families can build strong businesses. In my book, The Soul of Family Business, I discuss the equal importance that emotional equity has in a business as it pertains to a strong family legacy as well as a strong family business future. Looking for the secret to a profitable family business. Here’s your answer: strong intergenerational family relationships that build strong families and business together.
“I’m not talking to my relatives at Thanksgiving, much less at work! How do I work on building emotional equity now?”
Great question. Not so simple answer. Just like you get better each year at telling your Aunt May how much you love her sweet potato casserole (even if you don’t quite love it), it all starts with practice.
The key to building emotional equity is intentionality. Knowing that you want to build emotional equity is the first part. Being intentional about the role you play in building it is the second. Hopes and wishes alone are rarely enough to make meaningful change. Change has to start somewhere… and that somewhere (or someone) is you.
A common pitfall in family businesses is assuming that the business will inherently bring everyone together. Unfortunately, without intentionality, the business may do quite the opposite. While one would think that since a family is in business together, surely they have a joint passion and interest in the work. And, due to that commonality, many presume that work dynamics would strengthen the family. But running a business is hard; layering family dynamics makes it even harder.
Emotional equity is required because it’s a family business, and I’ve seen families find great business success when intentionally setting aside time to spend together, especially by including extended family who may not all live in the same household outside of work. Family meetings offer opportunities for emotional equity building. Family vacations don’t just build memories; they build equity as well. Family retreats create unique and memorable activities to bond those in the business and those who aren’t as well.
What Happens in the Family Stays in the Family
And that is relevant both in good and bad situations. It’s easy to keep an eye on the bottom line. Numbers don’t lie, right?! But in a family business, numbers are only part of the story. The other part comes in emotional equity that is less tangible but highly impactful.
The Soul of Family Business offers personal anecdotes, real-world case studies, useful tools and frameworks for family businesses to not just find success in a business; but find success within the family, too.