THE BLOG

Family Owned Businesses Share Universal Issues

04/03/2013 11:41 am ET | Updated May 28, 2013

North Korea's unpredictable 28-year-old Supreme Leader Kim Jong Un is the third generation in the family business. I'll let military, intelligence and State Department experts analyze Kim's mounting heated rhetoric and provocations, but I find his actions closely resemble behaviors commonly found in business executives in over their heads.

I worked with a publicly traded company that had declining revenues and significant losses for eight consecutive years yet the CEO held his position. He was able to maintain his power by intimidating employees, running tightly scripted board meetings, and manufacturing enemies in a cleverly orchestrated manner that placed his interests above all others. Every problem was pinned on a direct report -- every one of the positions reporting to him turned over, some several times -- and he claimed full personal credit for even the smallest company successes. When challenged or feeling threatened, this CEO would go on a major offensive, never for productive business reasons, but to distract attention away from many failures and to rally others around his supreme leadership. Company employees were kept under tight control through his ever watchful eye and the passive board members never reached down the organization to get anything more than the one-dimensional stories he presented. Fearful employees enabled by a weak board allowed for a corporate dictatorship that benefited one person against a backdrop of ruin.

Like many family businesses, Kim Jong Un got his position when his father passed away. A creditor committee brought me into a once highly successful family business to help salvage a company that was brought to its knees by an ill-prepared heir. Although the company had many excellent and loyal employees, second generation CEO alienated them because he was professionally incompetent and personally unpleasant. The founder built a thriving company by investing in the business and its people but the son used his inherited role to spare no expense on himself. Some of the better employees quit, but the real danger came from those who stayed and took a cue from their new boss by trading in their loyalty and productivity for taking care of themselves. The company was unable to function because employees routinely worked against one another to earn special consideration by being part of the heir's ever-shifting inner circle. Internal theft was off the charts and almost an accepted practice. Solving the company's problems, especially with an impatient creditor group, was made complicated because this second generation CEO fought every step of the way to maintain the one thing he cared about: being the boss. Ultimately, this led to dissolving a previously great company where everyone involved lost.

Despite all the obvious evidence of a deeply troubled isolated nation, the world seems to only notice and react to North Korea and its nuclear capability when that nation incites the threat of war. In business, the warning signs not heeded before a calamitous event, the initiative not taken, the impartial expertise not brought in soon enough, represent the gravest threats.