Book review: Family Business on the Couch, M.F.R Kets de Vries and R.S. Carlock with E. Florent-Treacy

Keeping it in the family

The dramatic possibilities of family businesses have long been obvious to television producers – as evidenced by a long line of programmes, including Dallas and, most recently, Brothers and Sisters.

Although the potential conflicts within businesses and families are extensively explored in such entertainments, they are often little match for the real thing.

Take the story of the Canadian supermarket chain Steinberg Inc, detailed in the introduction to this fascinating new book by Manfred F.R. Kets de Vries and his colleagues at the Insead business school.

After his mother opened a grocery store in Montreal, Sam Steinberg left school to become her junior partner and over the next 20 years became a pioneer in supermarket retailing. When he died in 1978 the company enjoyed sales of C$4bn (£2bn).

But then the problems came in the shape of conflicts between his daughters and outside executives (Sam had appointed a son-in-law chief executive on the basis of family rather than talent) and messy wrangles between the daughters. The result was that the business was sold to another company, which then collapsed after the new owner overextended himself.

The authors' point is that the "family drama" affects what happens in the business by determining "the continuity and success of the business, or conversely, sows the seeds of conflict and ultimate break-up". It is their contention that clues to what went wrong can be found in Steinberg and his upbringing. So in analysing the fall of the business, they would seek answers to such questions as How did Sams personality steer the creation and growth of his empire? How did it influence its downfall?

The answers provided by this approach and similar questions asked of other family businesses help provide the basis for the book. As the authors point out, because in a family business two different systems – the business and the family – come together, the workings of such an enterprise can only be understood by taking a psychological as well as economic approach.

Using language that can be understood easily by those unfamiliar with psychology, the authors explain how such elements as the family system's influence on individual behaviour and different personalities can have a profound effect on the family business. As they say, "there are limitations to logical decision making. Non-rational forces can strongly influence leadership, interpersonal relations, group functioning, organisational strategy and structure."

Particularly valuable is the exploration of the entrepreneur. Most family firms start with a lone founder, often a larger-than-life character with an idea or a determined personality. Such people are often not best suited to managing the growth of an organisation let alone organising a smooth succession among their heirs.

There follow many practical aids for turning all this psychological analysis into useful tools for running family businesses. There are maps and models and lots of instructions on how to avoid some of the pitfalls that make the book – like those television dramas – so compelling.

At the end of the book, the authors return to the story of Steinberg and relate how Sam had admitted when appointing his son-in-law to succeed him that "this is not the most qualified person we're selecting". He accepted that it might be in the best interests of the company to appoint a professional manager but said that he had had so much fun building and running the business that he would not deprive his family of doing it.

In other words, family came first. That is very laudable when it comes to a great man's personal life, but markedly less so when it comes to business.

John Wiley & Sons, £29.99