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When the family business turns into a royal mess

Prince Harry and Meghan Markle aren’t the first to discover the challenges of mixing work and family. Why do some family businesses thrive while others shut down?

Britain’s Queen Elizabeth II, Meghan the Duchess of Sussex and Prince Harry stand on a balcony to watch a flypast of Royal Air Force aircraft pass over Buckingham Palace in London on Tuesday, July 10, 2018. As part of a surprise announcement distancing themselves from the British royal family, Prince Harry and his wife Meghan declared they will “work to become financially independent” — a move that has not been clearly spelled out and could be fraught with obstacles.
Matt Dunham, Associated Press

SALT LAKE CITY — They’re an ocean apart, but Prince Charles, heir to the throne of England, and Gary Smith, a landscaper from Centerville, Utah, have something in common: Both have children who aren’t keen to carry on the family business.

Smith, 65, ran J&L Garden Center with his siblings until it closed in 2017. The business was started by his father and uncles nearly 60 years earlier, but the third generation of the family decided the business wasn’t for them, even though it was profitable and a beloved fixture in the community.

Gary Smith, then-co-owner of J&L Garden Center in Bountiful, talks to journalists on the business’ final day of operation, Saturday, Oct. 28, 2017.
Gary Smith, then-co-owner of J&L Garden Center in Bountiful, talks to journalists on the business’ final day of operation, Saturday, Oct. 28, 2017.
Ray Boone, Deseret News

Similarly, Britain’s royal family was rocked when the Duke and Duchess of Sussex announced earlier this month that they were stepping away from their traditional duties and would be living in Canada for part of the year. Prince Harry and Meghan Markle also said they desire financial independence and will no longer work with the monarchy’s traditional press pool, called the “Royal Rota,” but instead will give interviews to grassroots organizations and “young, up-and-coming journalists.”

The royal family, of course, is not a family business in the way that a garden center or a restaurant is, but as a profitable enterprise with an estimated worth of $88 billion, it’s an apt analogy, said David M. Karofsky, senior consultant for The Family Business Consulting Group, with headquarters in Chicago.

And the unhappiness expressed by Prince Harry and his wife is not unlike that of many young Americans who stand to inherit a family business, but consider it not a blessing but a life sentence, Karofsky said.

“Just because your last name is on the building, does that give you a right to work in the family business? Maybe. But I’m not sure that it’s always right for the family or the business,” said Karofsky, who has coached many would-be heirs out of their parents’ business and into other careers.

Although family businesses employ an estimated 60% of the U.S. workforce, other numbers show just how challenging the dynamics of family businesses can be. According to research by SCORE, a network of mentors that help small business owners, fewer than one-third of family businesses survive the transition of leadership from the first to the second generation. And only 13% of such businesses remain in the family for six decades or longer.

Part of the problem is that familial duty doesn’t drive younger people today as much as it did their grandparents; they’re more focused on finding work that is personally fulfilling, not just a reliable source of income. That’s why there’s a new crop of business consultants in America: those who help some family businesses succeed and others shut down. Here’s what Harry and Meghan could learn from them, and why family businesses could be in trouble if they don’t do two critical things.

Heirs apparent

Prince Harry, the youngest son of Prince Charles and the late Princess Diana, is used to controversy; even his marriage to Markle, a biracial American actress, raised eyebrows among some of the British elite. But the couple’s decision to “carve out a progressive new role within this institution” — said to have been a shock to the prince’s father and grandmother — roiled not just the royal family, but the world, with some people saying the move puts the monarchy itself at risk.

In fact, the headlines have renewed discussion about whether a monarchy is needed in contemporary England, with one British politician calling for a referendum on the matter.

There have been signs that Prince Harry and his wife, whose first child will turn 1 in May, have been increasingly unhappy since their marriage in May 2018. A royal biographer said last fall that the couple were “miserable” and in one interview after giving birth, Markle said, “I’ve said for a long time to H — that’s what I call him — it is not enough to just survive something. That’s not the point of life. You’ve got to thrive and feel happy.”

That belief may not be typical of the House of Windsor, established in 1917, but it is common among young and middle-aged Americans, who grew up in a culture that encouraged them to “follow your bliss.” And it can be a major source of conflict and angst when adult children realize they don’t want to be part of a longstanding business.

Karofsky, a family business consultant who works out of the suburbs of Boston, said he admires Prince Harry and Markle for making the gutsy decision to say publicly that the responsibilities of the family business don’t fit their lives at this time.

“I spend a lot of time with family businesses and clients who want not just what’s best for the business, but what’s best for the family, and sometimes those two things do not coincide.”

In the case of the Duke and Duchess of Sussex, who seem to be creating a brand called “Sussex Royal,” this is partly because of their desire to protect their son Archie from the glare of the royal spotlight. In the aftermath of the brouhaha dubbed “Megxit,” some observers have speculated that the first sign of a coming break with tradition was when the couple didn’t give their son a formal title, such as “earl.”

They’ve also indicated that they want independent careers, saying in a statement, “They value the ability to earn a professional income, which in the current structure they are prohibited from doing.” This prompted publishing executive Eric Nelson to quip on Twitter, “First time I’ve ever seen someone quit their family in order to spend more time with their jobs.”

The signage outside J&L Garden Center thanks customers on its final day of operation, Saturday, Oct. 28, 2017, in Bountiful.
The signage outside J&L Garden Center thanks customers on its final day of operation, Saturday, Oct. 28, 2017, in Bountiful.
Ray Boone, Deseret News

Transitioning through loss

When the adult children of Smith and his siblings said they weren’t interested in carrying on the business established by Smith’s father and uncles, the family grappled with what to do for four years, ultimately hiring a consultant to coach them through the process of dismantling the business. “It was tremendously hard to make that decision,” Smith said.

While the siblings were heartbroken to close a thriving and profitable business, they understood the next generation’s reluctance to assume what had been backbreaking work for their parents. The children had worked in the business in high school and college, but were adamant that they didn’t want to make it a career. So ultimately, the family sold the land that J&L Garden Center occupied, and Smith and two of his 10 siblings decided to carry on the family’s landscaping business as long as they’re able.

For now, it’s been a good transition and a way to keep working with long-established clients, but Smith knows that once he and his siblings are ready to retire for good, the landscaping business will shutter permanently, too. The younger generation just isn’t interested in gardening, he said. “All of them wanted to do more with computers, more new-generation stuff. The old school, working 90 hours a week, did not appeal to them.”

While a revelation like this can be devastating for a first- or second-generation business owner who expected his children to happily take over a business, few parents would want to see their children be miserable for 40 or more hours a week, Karofsky said. And sometimes family relationships improve once an unhappy heir finds a way out of work that was seen as a life sentence.

Other challenges

While it’s increasingly common for children to want out of a family business just because of a divergence of interests, there are other problems that can threaten the business. Writing for Forbes, Russ Alan Prince wrote about the challenges of “bad seeds,” family members who try to exploit the business instead of working for the interests of all involved. One study of 217 family businesses found that 9 in 10 reported having a bad seed within the family, Prince wrote.

But sometimes even when all parties mean well, a clash of values occurs, as when an heiress of Walt Disney’s empire began speaking out about worker compensation at Disneyland. Last summer, Abigail Disney, a filmmaker, told media outlets she was “livid” to discover what Disney employees made and called on Disney CEO Bob Iger to correct the wage gap.

Then there’s what Karofsky has long called “the Prince Charles Syndrome” — elder leaders of a family business refusing to relinquish power to younger family members. (Prince Charles is 71 and still waiting for his 93-year-old mother to hand him the crown.) A younger person’s desire to work in a family business can erode when he occupies a junior position for too long, or if a younger sibling has a position of authority over him.

But most of these problems can be mediated when families have good communication and a clear plan for the future, Karofsky said. While it’s impossible to know the inner workings of any family, much less the House of Windsor, the surprise nature of Prince Harry’s announcement makes it seem that the family doesn’t communicate well, he said.

And communication has to be not just about nuts-and-bolts of a family business, but about emotional issues. Families need to probe those subjects — for example, in the case of Megxit, exactly why Harry and Meghan’s decision was so upsetting to Prince Charles and his parents — before they tackle the logistics. That layer of complexity is not usually necessary in non-family businesses, in which decisions don’t have an emotional overlay.

Regardless of how Megxit plays out, there’s an ever-growing market for consultants to help family business owners navigate troubled water. Family business consulting took off in the 1980s, and the business niche is served by the Family Firm Institute and other groups providing education and connection.

Gary Smith, the Centerville landscaper, has also carved out a new career because of his experience closing down the family business. He’s now serving as a part-time consultant to family business owners across the country who are considering closing their doors.

“Every night when I go to sleep, I regret my decision,” he said. “But soon as I wake up in the morning, that feeling is gone.”