Managing the Family Business

 

 

If you own or are a part of a family-owned business, then you know how downright complicated it can get. The best business owners can keep their personal and business life separate, but it gets tricky when the two are inherently connected.

If you’re looking for the best business articles specifically for family-owned businesses, then go straight to Harvard Business Review’s two-part series called Managing the Family Business.

 Keys to Family Business Success:

1. Set some boundaries. It’s easy for family members involved in a business to talk shop 24/7. But mixing business, personal and home life will eventually produce a volatile brew. Limit business discussions outside of the office. That’s not always possible, but at least save them for an appropriate time — not at a family wedding for example.

2. Establish clear and regular methods of communication. Problems and differences of opinion are inevitable. Maybe you see them already. Consider weekly meetings to assess progress, air any differences and resolve disputes.

3.  Divide roles and responsibilities. While various family members may be qualified for similar tasks, duties should be divvied up to avoid conflicts. Big decisions can be made together, but a debate over each little move will bog the family business down.

4. Treat it like a business. A common pitfall in a family business is placing too much emphasis on family and not enough on business. The characteristics of a healthy business may not always be compatible with family harmony, so be ready to face those situations when they arise.

5. Put business relationships in writing. It’s easy for family members to be drawn into a business startup without a plan for what they will get out of the business relationship. To avoid hard feelings or miscommunication, put something in writing that defines compensation, ownership shares, duties and other matters.

6. Don’t provide “sympathy” jobs for family members. Avoid becoming the employer of last resort for your kids, cousins or other family members. Employment should be based on what skills or knowledge they can bring to the business.

7. Draw clear management lines. Family members who often have a present or presumed future ownership stake in the business have a tendency to reprimand employees who don’t report to them. This leads to resentment by employees.

8. Develop a succession plan. A family business without a formal succession plan is asking for trouble. The plan should spell out the details of how and when the torch will be passed to a younger generation. It needs to be a financially sound plan for the business, as well as retiring family members. Outside professional advice to draw up a plan is essential.

 A family-owned business may be defined as any business in which two or more family members are involved and the majority of ownership or control lies within a family. Family-owned businesses may be the oldest form of business organization. Farms were an early form of family business in which what we think of today as the private life and work life were intertwined. In urban settings it was once normal for a shopkeeper or doctor to live in the same building in which he or she worked and family members often helped with the business as needed.

 Governance, leadership, and management: businesses, families, and ownership groups need all three of these activities. If you observe an effective leader of a family business system over the course of a month, you'll see him or her engaging in all three of these activities. The amount of time spent on each activity or group will vary with the leader and circumstances. Some leaders favor leading and let others manage; some leaders spend most of their time governing the system. A parent also does these three things in the family he or she leads. A good Chairman of the board or family council leader also does an appropriate amount of all three. In this way and others, leadership of a business, family, and ownership is similar.