{"id":2012,"date":"2026-05-06T08:04:48","date_gmt":"2026-05-06T06:04:48","guid":{"rendered":"https:\/\/blog.iese.edu\/family-business\/?p=2012"},"modified":"2026-05-05T13:27:04","modified_gmt":"2026-05-05T11:27:04","slug":"underperformance-family-business","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/family-business\/2026\/underperformance-family-business\/","title":{"rendered":"What should we fix first: the business or the family?"},"content":{"rendered":"<p>When family-owned companies\u2014where ownership and management often overlap\u2014face years of <strong>weak results<\/strong>, rising debt and tight cash flows, <strong>owner families have little choice but to act.<\/strong><\/p>\n<p>Focusing on the business is a common trap\u2014<strong>the real issue often lies within the owning family<\/strong>. Key causes include:<\/p>\n<ul>\n<li><strong> A lack of strategic thinking and a clear long-term vision<br \/>\n<\/strong>Beyond day-to-day operations, the company lacks a robust governance structure. Short-term focus is necessary, but the business loses direction without a long-term vision.<\/li>\n<li><strong> A weak succession plan<br \/>\n<\/strong>At best, there is a succession plan on paper, but it is unrealistic and rarely followed.<\/li>\n<li><strong> Undefined roles and responsibilities<br \/>\n<\/strong>Conflating the family name with leadership capability is a common mistake. To ensure the strongest possible leadership, the company must clearly define the scope of authority and responsibilities of each family member.<\/li>\n<li><strong> An excessive focus on the profit and loss statement<br \/>\n<\/strong>Beyond the P&amp;L, businesses should have a thorough understanding and rigorous control the balance sheet and cash flow statement.<\/li>\n<\/ul>\n<h2><strong><span style=\"color: #ff0000\">The perfect storm<\/span><\/strong><\/h2>\n<p>Confronted with this \u201cperfect storm,\u201d family firms often lack the clarity needed to <strong>adapt their business model<\/strong> to changing market conditions, <strong>invest in innovation<\/strong> and <strong>attract the talent<\/strong> required to remain competitive and profitable.<\/p>\n<p>Persistent <strong>underperformance frequently takes root years earlier<\/strong>, when the company was still performing well and had the flexibility and liquidity to act.<\/p>\n<p>Over time, the family may have grown too comfortable with the way things were always done, <strong>avoiding honest reflection and difficult conversations<\/strong>.<\/p>\n<p>Attachment to the <strong>past, pride in the company\u2019s legacy and the natural inertia<\/strong> of the business can make it harder to recognize change and respond before it is too late.<\/p>\n<p>Expecting the owning family, while dealing with these i<strong>nternal tensions and misalignments<\/strong>, to solve the company\u2019s problems entirely on its own is often unrealistic.<\/p>\n<h2><strong><span style=\"color: #ff0000\">Facing reality: honest reflections<\/span><\/strong><\/h2>\n<p>In these situations, the owner family needs to ask difficult but necessary questions to determine whether they <strong>remain a strength for the business<\/strong> or have instead <strong>become more of a liability<\/strong> than an advantage.<\/p>\n<p>Some important questions to consider include:<\/p>\n<ul>\n<li><em> Are we still able to create strategic value?<\/em><\/li>\n<li><em> Do we have the necessary financial resources to course-correct and rebuild?<\/em><\/li>\n<li><em> Do we still have a sustainable competitive edge and the capacity to remain profitable?<br \/>\n<\/em><\/li>\n<\/ul>\n<p>If there is any doubt regarding any of these issues, it may be wiser for a <strong>different ownership<\/strong> group to step in to secure the company\u2019s future.<\/p>\n<h2><span style=\"color: #ff0000\"><strong>Humility and courage to make difficult decisions<\/strong><\/span><\/h2>\n<p>Turning the situation around requires more than technical fixes\u2014it also calls for <strong>humility, self-awareness and courage<\/strong>. Facing reality honestly is the first step toward making the right decisions.<\/p>\n<p><strong>Ego is often the biggest obstacle<\/strong>. It distances people from reality and makes it harder to listen to voices that may be uncomfortable, but necessary.<\/p>\n<p>When internal dynamics cloud the family\u2019s judgment, an outside perspective can bring <strong>greater objectivity and help uncover the real causes<\/strong> of the problem.<\/p>\n<p>This kind of support can make the difference between allowing problems to fester and making the right decisions in time to secure the company\u2019s <strong>long-term continuity and sustainability.<\/strong><\/p>\n<p><em><span class=\"text-Kvkr6N truncate-Pc_c1s textS-BC51wP\">Homepage image: <a href=\"https:\/\/unsplash.com\/@joa70?utm_source=unsplash&amp;utm_medium=referral&amp;utm_content=creditCopyText\" target=\"_blank\" rel=\"noopener\">Joachim Schn\u00fcrle<\/a> on <a href=\"https:\/\/unsplash.com\/photos\/a-close-up-of-a-piece-of-paper-with-arrows-GYpv7oh1G_A?utm_source=unsplash&amp;utm_medium=referral&amp;utm_content=creditCopyText\" target=\"_blank\" rel=\"noopener\">Unsplash<\/a> <\/span><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>When family-owned companies\u2014where ownership and management often overlap\u2014face years of weak results, rising debt and tight cash flows, owner families have little choice but to act. Focusing on the business is a common trap\u2014the real issue often lies within the owning family. Key causes include: A lack of strategic thinking and a clear long-term vision [&hellip;]<\/p>\n","protected":false},"author":818,"featured_media":2013,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[352,12,14094],"tags":[117516,120259,120260],"class_list":["post-2012","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-family","category-featured","tag-family-dynamics","tag-owner-families","tag-underperformance"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/posts\/2012","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/users\/818"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/comments?post=2012"}],"version-history":[{"count":7,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/posts\/2012\/revisions"}],"predecessor-version":[{"id":2020,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/posts\/2012\/revisions\/2020"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/media\/2013"}],"wp:attachment":[{"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/media?parent=2012"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/categories?post=2012"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.iese.edu\/family-business\/wp-json\/wp\/v2\/tags?post=2012"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}