Family Business: A Strategy for Success
Fifty percent of all American businesses are owned and run by families. There are some benefits associated with a family business, but there are also some pitfalls associated with undertaking a business venture with your family.
Before you try a business with a family member, keep in mind the risk you are taking. Splitting up a family business will affect both your business and your personal life. Building a business puts stress on a family member relationship that wouldn’t occur in a purely business relationship. For example, two brothers decide to open a catering business together. Fights break out because of underlying issues from the past or personal traits are revealed that you despise in each other. Then, you decide you cannot co-exist in the same company, but by then it may be too late to prevent damage done to your relationship and the dynamic of your family parties are forever changed.
Benefits of a Family Business
- Loyalty: Family members often exhibit more dedication, long-term stability, trust, loyalty, and shared values. Families tend to be more willing to make sacrifices for the sake of the business.
- Flexibility: Families tend to be more lenient and forgiving when it comes to work schedules, work-related decisions and judgments, and even mistakes.
- Work environment: Work environment may be more relaxed so it may not be an issue if you sometimes arrive late or leave early.
Pitfalls of a Family Business
- Possible Inadequacies: Family members often feel pressure to hire or promote relatives who lack the talent or skill for the particular position. Family members may find it hard to give negative feedback or even fire another family member over performance issues.
- Conflict: Relationships between family members deteriorate due to a constant airing of the family’s dirty laundry. This can turn off employees, resulting in a negative company culture, higher turnover rates, and fewer profits.
- Personal Issues: Personal issues are easily carried into the work environment, and work issues may be carried back into home life.
- Issues for Non-family Members: Non family members may find it difficult to deal with family conflicts on the job, limited opportunities for advancement, and the special treatment sometimes accorded family members. Outsiders may become bitter if your brother is allowed to come in late just because he’s your brother.
Strategies for Success in a Family Business
- Best Practices Contract: Establish boundaries by creating a “Best Practices Contract,” and make sure every family member working in the company has a copy. This is essentially a statement of general principles, outlining the vision of the business, its’ core values and the family’s commitment to them. It provides a documented method for reaching a family consensus on how a number of issues should be addressed, offering a practical guide for running the business and dealing with the family business issues that have the potential to cause disputes.
- Employment Qualifications: A strict policy of only hiring people with legitimate qualifications to fill existing openings can help a company avoid problems with unqualified family members.
- Define Roles: Clearly define everyone’s roles, and how they fit within the Company hierarchy.
- Reward Fairly: Reward all team members based on competence and achievements, not personal relationships.
- Promote Fairly: Ensure that non-family employees have the same chances for advancement as your family members.
- Succession Plan: Determine who will take over leadership and/or ownership of the company when the current generation retires or dies. The key is to have a well-defined plan in place. Lack of planning, is by far the most common underlying reason for a company to fail in the generational transition.
All family members involved in the business must understand that their rights and responsibilities are different at home and at work. While family relationships and goals take precedence at home, the success of the business comes first at work. Hiring a professional like an attorney or business consultant can be a tremendous asset when confronting planning issues. A neutral party can stabilize the emotional forces within the family and can bring a refreshing perspective. In addition, this professional can establish a family council and advisory board and serve as a facilitator for both. Dana Ball can help you figure out the best strategy for your family business.