Running a family business can be equal parts rewarding and challenging. The rewards often come from working together with loved ones to build a successful and profitable venture that provides a living for both family and non-family employees.
But there can also be tremendous challenges in managing a family enterprise. Dealing with the dynamics of family relationships can be difficult enough in the home environment. When these dynamics are brought into the workplace, there is the potential for problems both in the office and at home.
The difficulties of keeping family businesses going from one generation to the next are born out in the statistics. According to the Family Business Institute, only about 12 percent of family businesses survive into the third generation.
Regardless of how hard owners try to keep business and family separate - to be both dad and "the boss" at the same time, and not to bring work home at the end of the day - the lines eventually become blurred at some point in the history of most family businesses. The keys to minimizing the problems this could cause are to recognize their potential to do serious harm to both your business and your family, and then take steps to nip the problems in the bud.
Consider these five suggestions for ways to strike a balance and achieve harmony in both your family and your business:
It can be easy for misunderstandings to crop up among family members in the work environment. Maybe Johnny assumes that he’s going to get a promotion because his dad is the boss, or Susie assumes she’s going to take over the reins after her mom retires.
1. Communicate Openly and Honestly
Set aside time for all family members who are involved in the business to meet together and talk openly and honestly about anything that might be on their minds. Discussions at these meetings should be business-focused — the time shouldn’t be spent talking about family issues or problems you might be dealing with at home.
2. Keep "Shop Talk" to a Minimum at Home
Conversely, set some boundaries for talking about business while you’re at home. It’s probably unrealistic (and even undesirable) to never talk about the business in your home environment. But you might want to set some boundaries to help keep the line between business and home less blurry. For example, maybe you decide that shop talk is off limits over the weekend, during dinner or while on vacation.
3. Treat All Employees Fairly
This can be one of the biggest challenges for family business owners, who sometimes go to one extreme or the other: either giving family employees preferential treatment, or treating them more harshly than non-family employees in an effort not to show favoritism.
If non-family employees believe that family members are being treated preferentially, they will likely resent this and might even resort to looking for another job. Meanwhile, if family employees feel like they are being unfairly criticized or held to an unreasonably high standard, their morale and productivity will likely suffer — and hard feelings might carry over to the home environment as well.
4. Don’t be Afraid to Let Family Members Fail
Sometimes, family business owners can be overprotective of family members to the point of not ever giving them any real responsibility or decision-making authority. This is especially common with their children who are active in the business. But the most valuable business lessons often come from failure, so give your kids the freedom to fail in the business - ideally, while you are still there to help get things back on track.
5. Make Business Decisions Without Consideration of Family Repercussions
There are times when family business owners are faced with making decisions that are in the best interest of the company, but not necessarily a family employee. In these situations, you must make the right business decision, regardless of its possible impact on any single employee, including a family member. You owe this to the company and all of your other employees, both family and non-family.
Forming A Non-Family Board and a Family Business Constitution
Two other suggestions are to form a non-family board of advisors and to draft a family business constitution. Members of a non-family board - which might be comprised of your attorney, banker, CPA and/or outside business associates and advisors - can offer an outside perspective that helps you see family business issues more objectively.
A family business constitution, meanwhile, will put in writing the core principles governing the family business. These may include corporate governance, family employment and compensation guidelines, policies governing the ownership of business shares among family members, and the company’s mission, vision and values.
To discuss family business challenges and strategies in more detail, give us a call at (800) 773-7100 or Contact Us to request that a Relationship Manager contact you.